This dissertation investigates three types of investment manager trading behaviour to ascertain whether behavioural biases are present in the Australian investment management industry. In particular, this thesis examines whether these biases are detrimental to fund performance and market efficiency, and whether there is a need for regulatory review given the behaviour of institutions in their trading on the Australian Securities Exchange (ASX). The three empirical issues examined in this thesis are: leader and follower patterns in institutional trading; quarter-end gaming behaviour; and short-term trading activity and the role of institutional monitoring. Firstly, in the analysis of leader-follower behaviour, this thesis finds profitable trade packages are executed using multiple brokers as a way to accumulate a larger package in a shorter window of time and as means of enhancing disguise. Profitability is higher when these trade packages are mimicked and when there are up to three mimickers, compared to situations in which no mimicking occurs. Potential mimickers do not appear to ignore their own signal when deciding whether or not to follow when the sequence is short, but may do so for longer sequences as predicted by Grenadier (1999). It is concluded that short sequences of mimicking trades by active fund managers speed the price discovery process. Secondly, in an investigation of ??portfolio pumping?? by Australian active investment managers, this thesis finds significant abnormal stock and fund returns on the final business day of the calendar quarter-end. This thesis then identifies particular trades, appearing mostly in less liquid stocks, which accompany stocks that are marked up at quarter-end (it is not possible in this thesis to prove causation given the trades in this sample are not time-stamped). Fund managers execute more purchases than normal on the last day of the quarter in stocks in which they are overweight, providing strong evidence that manager behaviour is modified on the last day of the quarter-end. This study also finds poor-performing managers are more likely to perpetrate gaming trades, which may be as a result of career concerns and business risk management. New investors in funds would benefit substantially by delaying their entry to the fund until the day after the end of the quarter, as there is a lower entry price into the fund. However, portfolio pumping does not substantially affect the returns of extant fund investors, as the trading cost associated with the relatively small gaming trades is relatively small. Attempts by the ASX to reduce price manipulation, such as instituting a closing price call auction and then later revising the algorithm of this auction, have been effective in limiting both the number of occurrences, as well as the severity of gaming on the efficiency of the market. Thirdly, in an examination of the short-term trading activity of active investment managers which threaten exit, this thesis find that a larger number of actively trading multi-blockholders significantly raises firm performance. It remains true that an individual blockholder who intervenes to raise firm performance has to share gains with other blockholders. But firm manager effort is enhanced by the threat of exit by blockholders when they receive a bad signal concerning managerial effort. This study tests seven nested hypotheses proposed by Edmans and Manso (2008) using sequences of short-term institutional trades that threaten exit. Blockholder net profit is diminishing in the number of traders, consistent with a common signal of poor managerial performance. Moreover, these trade sequences are profitable even after transaction costs. Spreads are lower and the firm??s share price becomes more sensitive to managerial performance as more blockholders threaten exit. From the three broad investigations into fund manager activity this thesis undertakes, active fund managers are shown to behave rationally and, apart from their behaviour at quarter-end, they act in the interests of their investors, aid price discovery, reduce bid-ask spreads and thereby exhibit a positive influence on market efficiency.

This dissertation investigates three types of investment manager trading behaviour to ascertain whether behavioural biases are present in the Australian investment management industry. In particular, this thesis examines whether these biases are detrimental to fund performance and market efficiency, and whether there is a need for regulatory review given the behaviour of institutions in their trading on the Australian Securities Exchange (ASX). The three empirical issues examined in this thesis are: leader and follower patterns in institutional trading; quarter-end gaming behaviour; and short-term trading activity and the role of institutional monitoring. Firstly, in the analysis of leader-follower behaviour, this thesis finds profitable trade packages are executed using multiple brokers as a way to accumulate a larger package in a shorter window of time and as means of enhancing disguise. Profitability is higher when these trade packages are mimicked and when there are up to three mimickers, compared to situations in which no mimicking occurs. Potential mimickers do not appear to ignore their own signal when deciding whether or not to follow when the sequence is short, but may do so for longer sequences as predicted by Grenadier (1999). It is concluded that short sequences of mimicking trades by active fund managers speed the price discovery process. Secondly, in an investigation of ??portfolio pumping?? by Australian active investment managers, this thesis finds significant abnormal stock and fund returns on the final business day of the calendar quarter-end. This thesis then identifies particular trades, appearing mostly in less liquid stocks, which accompany stocks that are marked up at quarter-end (it is not possible in this thesis to prove causation given the trades in this sample are not time-stamped). Fund managers execute more purchases than normal on the last day of the quarter in stocks in which they are overweight, providing strong evidence that manager behaviour is modified on the last day of the quarter-end. This study also finds poor-performing managers are more likely to perpetrate gaming trades, which may be as a result of career concerns and business risk management. New investors in funds would benefit substantially by delaying their entry to the fund until the day after the end of the quarter, as there is a lower entry price into the fund. However, portfolio pumping does not substantially affect the returns of extant fund investors, as the trading cost associated with the relatively small gaming trades is relatively small. Attempts by the ASX to reduce price manipulation, such as instituting a closing price call auction and then later revising the algorithm of this auction, have been effective in limiting both the number of occurrences, as well as the severity of gaming on the efficiency of the market. Thirdly, in an examination of the short-term trading activity of active investment managers which threaten exit, this thesis find that a larger number of actively trading multi-blockholders significantly raises firm performance. It remains true that an individual blockholder who intervenes to raise firm performance has to share gains with other blockholders. But firm manager effort is enhanced by the threat of exit by blockholders when they receive a bad signal concerning managerial effort. This study tests seven nested hypotheses proposed by Edmans and Manso (2008) using sequences of short-term institutional trades that threaten exit. Blockholder net profit is diminishing in the number of traders, consistent with a common signal of poor managerial performance. Moreover, these trade sequences are profitable even after transaction costs. Spreads are lower and the firm??s share price becomes more sensitive to managerial performance as more blockholders threaten exit. From the three broad investigations into fund manager activity this thesis undertakes, active fund managers are shown to behave rationally and, apart from their behaviour at quarter-end, they act in the interests of their investors, aid price discovery, reduce bid-ask spreads and thereby exhibit a positive influence on market efficiency.

I examine the effect of ownership structure on firms' propensities to save the proceeds of a share issuance as cash. Specifically, I focus on changes in cash savings at the time of a seasoned equity offering (SEO), a moment at which the firm experiences a large inflow of cash, to determine whether ownership structures such as managerial blockholdings or the presence of institutional investors materially affect firms' decisions regarding their level of cash savings. I find that firms with managerial blockholders are more inclined to save share issuance proceeds as cash, relative to firms with outside blockholders or no blockholders present. This finding could be interpreted as consistent with either managerial entrenchment or incentive alignment, so I distinguish between these competing forces by examining SEO announcement returns. The market's reaction to SEO announcements when managerial blockholders are present is significantly worse on average when the firm has excess cash, lending support to the entrenchment explanation. I also find that firms with greater total institutional ownership save more cash from equity issuance, which is consistent with the theory that greater firm monitoring allows optimal corporate cash holdings to increase because shareholders are less concerned about potential misuses of cash.

Submitted by JOSIANE SANTOS DE OLIVEIRA (josianeso) on 2019-03-25T14:07:01Z No. of bitstreams: 1 Tadeu Grando_.pdf: 1065557 bytes, checksum: 9fd0e9a6e7d4aa9ada0cddccf3dfbc38 (MD5) / Made available in DSpace on 2019-03-25T14:07:01Z (GMT). No. of bitstreams: 1 Tadeu Grando_.pdf: 1065557 bytes, checksum: 9fd0e9a6e7d4aa9ada0cddccf3dfbc38 (MD5) Previous issue date: 2019-01-03 / CAPES - Coordenação de Aperfeiçoamento de Pessoal de Nível Superior / Estudos teóricos e empíricos recentes sugerem que os blockholders, acionistas com participação maior ou igual a 5%, exercem poder como mecanismo de governança corporativa nas empresas. O poder de governança dos blockholders pode ser exercido através de dois mecanismos: intervenção (“voz”), que se refere à disposição dos acionistas de incorrer em atividades dispendiosas para aumentar o valor da empresa; e pela ameaça da saída (“exit”), que se refere à ameaça da venda de ações da empresa no mercado. Pesquisas acadêmicas recentes tem sido realizadas nesta área, relacionando a presença de blockholders com a eficiência gerencial, sobretudo no contexto americano. Estes estudos fornecem evidências consistentes que a ação dos blockhloders nas empresas pode afetar o comportamento gerencial. Entretanto, poucos estudos abordam diretamente a relação dos blockholders com o valor das empresas. Ademais, estudos que avaliam se a presença de blockholders realmente disciplina a gestão são escassos nos países emergentes. De um modo geral, os blockholders são acionistas com participação relevante no quadro acionário e, em decorrencia deste fato, em tese, possuem fortes incentivos para monitorar, coletar informações privadas e intervir junto aos controladores e à gestão, reduzindo custos de agência, e consequentemente, aumentanto o valor das empresas. Neste sentido, a fundamentação das hipóteses desta tese defende que a presença de blockholders na estrutura de propriedade das empresas brasileiras relaciona-se positivamente com a criação de valor, e que a força desta relação depende das variáveis participação acionária, número de blockholders, sensibilidade dos gestores ao preço das ações, liquidez das ações da empresa, dos tipos de blockholders, da diversidade dos tipos de blockholders, do nível de ativismo e das inter-relações entre os blockholders nas empresas. Para resolução das hipóteses desta tese, a amostra foi constituída por empresas brasileiras abertas, não financeiras, cujos dados estão disponíveis na Economática®, totalizando 334 empresas, com 1.899 observações. Os dados se referem ao período de 2010 a 2016. Metodologicamente, para atendimento dos propósitos desta tese, formularam-se seis hipóteses, sendo que para cada hipótese configuraram-se duas regressões por mínimos quadrados ordinários, com dados em painel, conforme as métricas de criação de valor consideradas nesta pesquisa, Q de Tobin (Q) e retorno (R). Salienta-se que, para os modelos onde utilizou-se o Q aplicou-se dados em painel com efeitos fixos, e nos modelos onde utilizou-se o R aplicou-se dados em painel com pooled, conforme orientação dos testes econométricos preliminares. Os resultados gerais desta pesquisa indicam que a simples presença de blockholders, nas companhias brasileiras, não produz os resultados encontrados na literatura teórica e empírica, que fundamentaram a base desta tese. Pelo contrário, os resultados indicam uma relação negativa entre a presença dos blockholders e o valor das empresas brasileiras para ambas as métricas de valor utilizadas. Os diferentes resultados em relação aos apresentados pelos modelos teóricos e empíricos encontrados nos EUA são explicados pelas características peculiares do mercado brasileiro, especialmente no que tange às diferenças em relação à estrutura de propriedade. Num mercado como o dos EUA, um blockholder com 5% de participação na empresa é um grande acionista, é uma ameaça aos controladores e à gestão, já que lá o controle é exercido, na maioria das vezes, com menos do que 50% do capital total. No Brasil, na maioria das vezes, as empresas possuem controle acionário definido, com isso o blockholder não tem a mesma força. Desta forma, como observado nesta pesquisa, os blockholders brasileiros, em maioria, são passivos. Essa passividade faz com que os controladores e ou gestores da empresa utilizem os blockholders para diluição do capital acionário e dos direitos sobre o fluxo de caixa da empresa, o que aumenta os incentivos de expropriação por parte dos controladores e gestores, elevando os custos de agência e reduzindo o valor das empresas. No mesmo sentido, percebe-se que as métricas relacionadas com a força dos blockholders como mecanismo de governança não possuem efeito positivo na relação dos blockholders com a criação de valor das empresas. Pelo contrário, as métricas vinculadas à participação acionária e ao número de blockholders relacionam-se negativamente com a criação de valor nas empresas, reforçando o argumento teórico de que a diluição do capital acionário e do fluxo de caixa do controlador aumenta os incentivos deste em expropriar. Os diferentes tipos de blockholders ou a heterogeneidade destes, na maioria dos casos, não apresentou relação com a criação de valor nas empresas. Em relação à diversidade dos blockholders presentes na estrutura de propriedade das empresas, conclui-se que esta afeta negativamente o valor das empresas, ou seja, quanto mais tipos diferentes de blockholders presentes na estrutura de propriedade das empresas, pior são os resultados em relação às métricas de criação de valor. Entretanto, quando se identifica a presença nas empresas brasileiras de blockholders ativos e suas inter-relações, percebe-se que, nesta situação, os blockholders potencializam o efeito de criação e o valor na empresa, convergindo com as premissas teóricas apresentadas por estudos americanos que fundamentaram esta tese. Essa aproximação dos resultados pode ser atribuída ao perfil dos investidores ativos brasileiros que realmente agem como mecanismo de governança, o que acontece na maioria dos casos com os blockholders no mercado americano. Os resultados desta tese permitem o avanço da literatura nacional e internacional sobre o tema, demonstrando que, sob uma estrutura de propriedade concentrada, sobretudo com a presença da figura de um “dono” e/ou acionista majoritário nas empresas, como é o caso brasileiro, a interferência dos blockholders, de forma geral, no monitoramento da gestão, se torna mais difícil. No ambiente brasileiro a maioria dos blockholders não consegue utilizar o seu poder de voz, em decorrência da alta concentração de propriedade e das dificuldades de exercer influência efetiva junto ao controlador ou à gestão. No mesmo sentido, também se observa uma dificuldade em relação ao mecanismo de exit, pois a maioria das empresas listadas não fornece liquidez suficiente nos papéis para que o poder de ameaça de saída faça sentido. / Recent theoretical and empirical studies have suggested that blockholders, who hold the shares of 5% or more in companies, exercise their power as a mechanism of corporate governance. The governance power of blockholders can be exercised through two intervention mechanisms, one is "voice", which refers to the willingness of shareholders to incur costly activities to increase the value of the company, and another is the threat of exit, which refers to the threat of the sale of company shares in the market. Newly academic research have been carried out in this area, relating the presence of blockholders with managerial efficiency, especially in the American context. These studies provide consistent evidences that the action of blockhloders in companies can affect managerial behavior. However, few studies directly aproach the relationship between blockholders and companies' value. In addition, studies that assess whether the presence of blockholders actually discipline management are scarce in emerging countries. In general, the blockholders are shareholders with relevant participation in the ownership structure, as a result of this fact, in thesis, they have strong incentives to monitor, to collect private information and to intervene together with controllers or management, reducing agency costs and, consequently, increasing the companies value. In this sense, the hypotheses of this thesis argue that the presences of blockholders in the ownership structure of Brazilian companies are positively related to the creation of value, and that the strength of these relationship depends on the variables equity interest of blockholder, the number of blockholders, the managers' sensitivity to share price, liquidity of company shares, the types of blockholders, the diversity of the types of blockholders, the level of activism, and the interrelations among the blockholders in the companies. To resolve the hypotheses of this thesis, the sample was made up of Brazilian non-financial companies, whose data are available in Economática®, totaling 334 companies, with 1,899 observations. The data refer to the period from 2010 to 2016. Methodologically, to answer the purposes of this thesis, six hypotheses were formulated, and for each hypothesis, two ordinary least squares regressions were configured, with panel data, according to the metrics of value creation considered in this research, Q of Tobin (Q) and return (R). For the models where the Q was used, panel data with fixed effects were applied, and in the models where the R was used, panel data with pooled were applied, according to the orientation of the preliminary econometric tests. The general results of this thesis indicate that the mere presence of blockholders in Brazilian companies does not produce the kind of results which were found in the theoretical and empirical literature, which provided the basis for this thesis. On the contrary, the results indicate a negative relation between the presence of blockholders and the value of Brazilian companies for both metrics of value of this research. The different results in relation to those presented by the theoretical and empirical models found in USA are explained by the peculiar characteristics of the Brazilian market, especially with respect to the differences in ownership structure. In a market like the US, a blockholder with a 5% stake in the company is a large shareholder, is a threat to controllers and managements, since control there is exercised, for the most part, with less then 50% of the total capital. In Brazil most of the time companies have a defined shareholder control, so the blockholders does not have the same strengh. Thus, as seen in this research, Brazilian blockholders, in the majority, are passive. This passivity causes company controllers and managers to use blockholders to dilute equity capital and cash flow rights of the company, which increases expropriation incentives by controllers and managers, raising agency costs and reducing the value of companies. In the same way, it can be observed that the metrics related to the strength of the blockholders as mechanisms of governance do not have a positive effect on the relationship of the blockholders with the creation of value of the companies. On the contrary, the metrics related to the shareholding and the number of blockholders are related negatively to the creation of value in the companies, reinforcing the theoretical argument that the dilution of stock capital and the cash flow of the controller increases the incentives of controller’s expropriation. The different types of blockholders or the heterogeneity of these, in most cases, were not related to the creation of value in companies. In relation to the diversity of the blockholders present in the corporate ownership structure, it is concluded that this affects negatively the value of the companies, that means, the more types of different blockholders present in the ownership structure of the companies, the worse the results in relation to the metrics for creating value. However , when the presence of active blockholders and their interrlationsships is in identified in brazilian companies, it can be seen that, in this situation, blockholders potentiate the creation effect and value in the company, converging with the theoretical premises presented by American studies that supported this thesis. This approximation of the results can be attributed to the profile of the Brazilian active investors that really act as mechanisms of governance, which happens in most cases with the blockholders in the American market. The results of this thesis allow the advanced of the national and international literature about theme, demonstrating that under a concentrated property structure, especially with the presence of the figure of a "owner" and / or majority shareholder in companies, as in the case of Brazil, , in general, the monitoring of management becomes more difficult. In the Brazilian environment, the majority of blockholders cannot use their voice power, due to the high concentration of ownership and the difficulties of exercising effective influence with the controller or the management. In the same way, there is also a difficulty with the exit mechanism, since most listed companies do not provide sufficient liquidity in the roles for the threat of exit power to make sense.

[pt] Esta dissertação teve como objetivo verificar se grandes acionistas – blockholders, não pertencentes ao bloco de controle, em um cenário de baixa proteção ao investidor e alta concentração de capital, como o brasileiro, atuam como um mecanismo de governança corporativa, reduzindo os custos de agência devido ao monitoramento dos gestores/controladores. A base de dados compreendeu as empresas não financeiras de capital aberto no Brasil, pelo período de 2010 até 2019, totalizando 1.091 empresas-ano. Foi utilizada regressão por efeitos fixos para dados em painel, e, como análise de robustez, o Propensity Score Matching, tendo como resultado um impacto negativo no Q de Tobin para as empresas que possuem blockholder em sua estrutura. Tal resultado apesar de divergir da literatura internacional, encontra eco em outros trabalhos realizados no cenário brasileiro, e justifica-se pela alta concentração acionária das empresas, pois blockholders não representariam ameaça real aos controladores, que geralmente possui mais que 50 por cento do capital votante, pela baixa qualidade das leis de proteção aos investidores e a fatores culturais, que incentivam a passividade dos acionistas brasileiros. A existência de blockholders neste cenário demonstra uma diluição do capital acionário e do fluxo de caixa que aumenta os incentivos que os gestores/controladores possuem para expropriar a empresa. Com relação a heterogeneidade dos blockholders, verificou-se que empresas com blockholders do tipo familiar apresentam Q de Tobin inferior aos demais tipos. Este resultado é explicado pois os blockholders do tipo familiar teriam maior propensão a formação de alianças com o controlador para expropirar valor dos demais acionistas minoritários. / [en] This dissertation aimed to verify whether large shareholders - blockholders, not belonging to the control block, in a scenario of low investor protection and high concentration of capital, such as the Brazilian, act as a corporate governance mechanism, reducing agency costs due to the monitoring of managers / controllers. The database comprised non-financial publicly traded companies in Brazil, from 2010 to 2019, totaling 1,091 company-years. Fixed effects regression was used for panel data, and, as a robustness analysis, the Propensity Score Matching, resulting in a negative impact on Tobin s Q for companies that have blockholders in their structure. This result, despite diverging from the international literature, is echoed in other works carried out in the Brazilian scenario, and is justified by the high shareholding concentration of the companies, as blockholders would not represent a real threat to controller s, which generally has more than 50 percent voting capital, due to the low quality of investor protection laws and cultural factors, which encourage the passivity of Brazilian shareholders. The existence of blockholders in this scenario demonstrates a dilution of share capital and cash flow that increases the incentives that managers / controllers have to expropriate the company. Regarding the heterogeneity of the blockholders, it was found that companies with family-type blockholders have Tobin s Q lower than the other types. This result is explained by the fact that family-type blockholders would be more likely to form alliances with the controlling shareholder to expropriate other minority shareholders.

<p>In Chapter 1, I document a negative (positive) relationship between changes in large (small) blockholders' ownership and abnormal returns. The evidence in this paper suggests that an increase in the relatively large blockholders' ownership raises the consumption of private benefits while an increase in the relatively small blockholders' ownership constrains large blockholders from expropriating minority shareholders. Moreover, I find an inversely U-shaped relationship between changes in the largest blockholders' ownership and firm value. As large blockholders' ownership and control increase, the negative effect of firm value driven by expropriating minority shareholders starts to exceed the incentive benefits of monitoring by the largest blockholder. I also show that the negative relationship between changes in institutional investors' control and abnormal returns declines as analysts' following increases.</p><p>In Chapter 2, I study the role of trading as a governance mechanism. I hypothesize that governance through trading plays a significant monitoring role in practice and that engaging in "voice" and "exit" can be substitutes. I show that abnormal turnover following earnings announcements is significantly higher for firms with large institutional blockholders than for those with small individual</p><p>shareholders. For firms with majority institutional ownership, I demonstrate that abnormal trading is higher for firms with multiple blockholders than for those with a single large blockholder and that abnormal trading increases with the number of institutional investors and declines with the percent of stocks owned by the</p><p>largest institutional investor. Moreover, this excess trading is driven by mutual fund investors, which are non-interventionist and thus are more likely to engage in "exit" than "voice". I also show that for firms with large institutional blockholders, abnormal trading following public announcements increases with liquidity.</p> / Dissertation

This study investigates whether family ownership influences firms’ accounting and market-based performance as measured by ROA respectively Tobin’s Q. The Swedish market is especially interesting due to its unique corporate governance system, and because previous studies based on a Swedish sample present contradictory findings on the family-performance relationship. Furthermore, we explore whether the stake, the active involvement of family members, and the presence of other blockholders, can be connected to firm performance. The results suggest that family firms are related to superior accounting performance as compared to non-family firms, and that actively involved family members are related to the positive relation. The evidence on market performance shows that families are awarded lower valuations as compared to non-family firms. The market results seem to be driven by extensive control in terms of voting rights or the combined monitoring powers of multiple blockholders, as family firms with a moderate stake of 20-50%, and firms without other blockholders, are not related to market discounts. Connecting to agency theory, the findings suggest that family ownership is related to reduced agency costs type I, thus increasing the profitability, but may be associated with higher type II costs if their control is too extensive.

No description available.

This dissertation consists of three essays examining the relation between corporate governance and firm performance. The theme of this study is that the widely documented long-term underperformance in equity carve-outs can be partly explained by weak corporate governance. The first essay presented in Chapter 2 explores the effect of shareholder-rights protection on the performance of a sample of firms that initiated a carve-out during the period 1983-2004. Using the Gompers, Ishii, and Metrick (2003) index and Bebchuk, Cohen, and Ferrell (2004) entrenchment index, as proxies for the quality of shareholder-rights protection, I provide evidence that firms with better shareholder rights protection outperform those with weaker rights protection. Results indicate that the weaker the rights protection, the greater the degree of underperformance. Overall, the results are robust to measures of firm performance and to model specification. The second essay presented in Chapter 3 examines the relation between firm performance and board structure. In particular, I study how board size, board independence, and CEO duality influence firm performance. I find that board size for non-financial firms is negatively related to firm performance but positively associated with performance for financial firms. Board independence is positively related to firm performance and CEO duality is negatively associated with performance for both financial and non-financial firms. These results are robust to various measures of firm performance. The conflicting evidence on board size, between financials and non-financials, seems to suggest that the scope and complexity of a firm.s operations drives board size. The third essay presented in Chapter 4 investigates corporate ownership and firm performance. I focus on insider ownership, outside blockholder ownership, and ownership concentration. Results show that insider ownership is negatively related to firm performance even at low levels of insider ownership levels. It is plausible that the combination of parent ownership and management ownership in the subsidiary exacerbate the entrenchment effect thus overwhelming the incentive alignment effects that theory posits. I document a positive relation between outside blockholder ownership and firm performance. And finally, I show that the level of ownership concentration increases (decreases) in anticipation of positive (negative) changes in firm performance.

The classical corporation, as described by Berle and Means (1932), was characterized by ownership that is dispersed between many small shareholders, yet control was concentrated in the hands of managers. This ownership structure created the conflict of interest between managers and dispersed shareholders. More recent empirical work (see, e.g., La Porta et al. (1999) and Barca and Becht (2001)) has shown that ownership in many countries around the world is typically concentrated in the hands of a small number of large shareholders. As a result, an equally important agency conflict arises between large controlling shareholders and minority shareholders. On the one hand, large shareholders can benefit minority shareholders by monitoring managers (Shleifer and Vishny, 1986, 1997). On the other hand, large shareholders can be harmful if they pursue private goals that differ from profit maximization or if they reduce valuable managerial incentives (Shleifer and Vishny, 1997; and Burkart et al., 1997). In the presence of several large shareholders, a conflict of interest may arise between these controlling shareholders (see, e.g., Zwiebel (1995), Pagano and Röell (1998), and Bennedsen and Wolfenzon (2000)). They can compete for control, monitor each other, or form controlling coalitions to share private benefits. The question arises as to what determines the role of controlling shareholders in various firm policies and performance. Previous literature has noted that the incentives to expropriate minority shareholders are often exacerbated by the fact that the capital invested by the controlling shareholders is relatively lower than the voting control they achieve through the use of dual class shares (i.e., shares with differential voting rights) or stock pyramids (e.g., Claessens et al., 2002). Moreover, the identity of the shareholder (e.g., family vs. financial institution) is important for understanding the role of controlling shareholders (see, e.g., Holderness and Sheehan (1988), Volpin (2002), Claessens et al. (2002), and Burkart et al. (2003)). Using Swedish data, Cronqvist and Nilsson (2003) show that the agency costs of family owners are larger than the agency costs of other controlling owners. The role of controlling shareholders in transition countries is exacerbated by the fact that the legal and general institutional environment remains underdeveloped. In such an environment, strong owners may be the second best option to weak legal protection of investors (La Porta et al., 1997, 1998). The transition countries of central and eastern Europe are experiencing increasingly concentrated control structures, typically with the controlling owner actively involved in the management of the firm (Berglöf and Pajuste, 2003). Moreover, experience from transition countries suggests that foreign direct investment, where investors take controlling positions, have been critical to the successful restructuring of privatized firms. This thesis consists of four self-contained chapters that empirically examine various corporate governance issues. The common theme throughout the thesis is the focus on large shareholders, their identity, as well as to whether they deviate from the principle of one share-one vote. In particular, I examine the effect of large shareholders on firm value (in the first and third chapters), dividend policies (in the second chapter), and stock returns (in the final chapter). The first two chapters employ the data from Finland, the third looks at companies in seven European countries where deviations from one share-one vote are common, and the final one explores the evidence from transition countries. / Diss. Stockholm : Handelshögskolan, 2004