Family control,multiple institutional block-holders,and informed trading |
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| Authors: | Xiaoxiang Zhang Jenifer Piesse Igor Filatotchev |
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| Institution: | 1. Newcastle Business School, Northumbria University, Newcastle Upon Tyne NE1 8ST, UKxiaoxiang.zhang@northumbria.ac.uk;3. Bournemouth Business School, Bournemouth University, Holdenhurst Rd, Dorset BH8 8BS, UK;4. Department of Agricultural Economics, University of Stellenbosch, Private Bag X1, Matieland 7602, Stellenbosch, South Africa;5. Sir John Cass Business School, City University London, 106 Bunhill Row, London EC1Y 8TZ, UK;6. Department of International Business, Vienna University of Economics and Business, Augasse 2-6, 1090 Vienna, Austria |
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| Abstract: | This paper investigates how large family shareholders and institutional block-holders jointly influence informed trading and firm valuation in the Hong Kong stock market. It combines market microstructure research with studies on the governance roles of multiple block-holders and finds that institutional block-holders rely on their relative controlling power vis-à-vis family owners to mitigate problems associated with informed trading. They also use their ownership rights to improve the structure of informed trading. However, these governance roles are predominantly exercised by pressure-resistant institutional block-holders. Informed trading reduces firm valuation, while an improvement in its structure increases valuation. Therefore, the governance roles of controlling families and pressure-resistant institutional block-holders may have different implications in terms of investors’ perceptions of private information risk. |
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| Keywords: | ownership structure family control institutional block-holders informed trading Hong Kong |
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