Working Papers,
Copenhagen Business School, Department of Finance

Abstract: This paper analyzes the relationship between ownership structure and security

performance. We use a unique data set that includes all of the announcements of

changes in institutional and strategic investors' ownership in firms listed on the

Copenhagen Stock Exchange in 1997. Using a piecewise linear model, we find a

decrease in security performance after a threshold level of ownership. This indicates

the maximization of the instit utional and strategic investors' entrenchment benefits,

which result from actively exercising corporate governance. However, the choice of

cutoff points affects the estimation and the robustness is not convincing. The results

of analyzing changes in ownership structure reveal that the autocorrelation in security

returns contributes with more than half of the abnormal return. This reflects the

investors trading strategy: stocks that outperform (underperform) are sold (bought).

Overall, these results indicate that the literature may ove restimate corporate

governance as a value-added factor.

Keywords: Corporate Governance; Ownership Structure; Event Study; Piecewise Regression

JEL-codes: G14; G32

30 pages, August 1, 1999

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