Reading between the blocks

We examine the influence of multiple blockholders on the ownership-firm value relationship for a comprehensive sample of US firms. Additional blockholders can either form a coalition with or monitor the largest individual blockholder. The choice between these alternatives influences the manner in which ownership affects firm value. Further, the choice between coalition formation and monitoring is influenced by blockholder identity - individual blockholders tend to forma coalition with while corporate blockholders tend to monitor the largest individual blockholder. Even among individual (corporate) blockholders, there is significant variation in the probability of coalition formation (monitoring). Overall, our findings suggest that the ownership-firm value relationship critically depends on the presence and identity of additional blockholders. (C) 2017 Elsevier B.V. All rights reserved.