Working Paper: NBER ID: w10671
Authors: Jennifer Dlugosz; Rüdiger Fahlenbrach; Paul Gompers; Andrew Metrick
Abstract: Large blocks of stock play an important role in many studies of corporate governance and finance. Despite this important role, there is no standardized data set for these blocks, and the best available data source, Compact Disclosure, has many mistakes and biases. In this paper, we document these mistakes and show how to fix them. The mistakes and bias tend to increase with the level of reported blockholdings: in firms where Compact Disclosure reports that aggregate blockholdings are greater than 50 percent, these aggregate holdings are incorrect more than half the time and average holdings for these incorrect firms are overstated by almost 30 percentage points. We also demonstrate that our fixes are economically and statistically significant in an analysis of the relationship between firm value and outside blockholders.
Keywords: large blocks of stock; corporate governance; data accuracy
JEL Codes: G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| outside blockholder ownership (G34) | firm value (G32) |
| cleaned data (Y10) | statistical significance of coefficients (C29) |
| raw data (Y10) | statistical significance of coefficients (C29) |