The impact of private benefits on institutional ownership change: evidence from markets with different sentiments

Yong Wang ()

Journal of Economics and Finance, 2014, vol. 38, issue 4, 609-626

Abstract: This study investigates the relationship between private benefits and institutional ownership change in markets characterized by different investors’ sentiments. High-sentiment markets tend to overvalue a firm and thereby offer institutional investors a chance to sell shares and profit from overvaluation by forgoing the private benefits otherwise obtainable. Empirical analysis of ownership data from 1990 to 2008 reveals that, in high-sentiment markets, institutional investors sell more shares low in private benefits (dual-class firm share) than shares high in private benefits (non-dual-class firm share). In contrast, firm insiders, who consume significant private benefits in both dual-class and non-dual class firms, sell more dual-class firm shares in both high- and low-sentiment markets. Their ownership disposition is more likely driven by the need for diversification. Subsample analyses show that public pension funds drive the market-sentiment-related change of institutional ownership. Copyright Springer Science+Business Media, LLC 2014

Keywords: Institutional Ownership; Private Benefits; Market Sentiment; Public Pension Fund; G23; G32; G39 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s12197-012-9235-x

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