Negotiated Block Trades and Corporate Control

Michael J Barclay and Clifford G Holderness

Journal of Finance, 1991, vol. 46, issue 3, 861-78

Abstract: The authors identify negotiated trades of large-percentage blocks of stock as corporate control transactions. When a block trades and the firm is not fully acquired, cumulative abnormal returns average 5.6 percent and 33 percent of the chief executives are replaced within a year. Stock-price increases are larger when control passes to the new blockholder, when management does not resist the blockholder's effort to influence corporate policy, and when the block purchaser eventually fully acquires the firm. These findings suggest that the specific skills and expertise of blockholders, and not just the concentration of ownership, are important determinants of firm value. Copyright 1991 by American Finance Association.

Date: 1991
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