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Block shareholder identity and firm performance in New Zealand

Nicholas Boone (Deloitte Touche Tohmatsu Limited, Auckland, New Zealand Monash University, Melbourne, Australia)
Sisira Colombage (Deloitte Touche Tohmatsu Limited, Auckland, New Zealand)
Abeyratna Gunasekarage (Deloitte Touche Tohmatsu Limited, Auckland, New Zealand)

Pacific Accounting Review

ISSN: 0114-0582

Article publication date: 13 September 2011

Abstract

Purpose

The purpose of this study is to examine whether the influence of block ownership on firm performance depends on the identity of the largest investor.

Design/methodology/approach

The authors analyse the data for New Zealand companies for the period from 2002 to 2007 and develop multiple regression models which test the influence of block ownership on firm performance subject to the identity of the investor. A two‐stage least square approach is employed to test the effect of possible reverse causality between block ownership and firm performance on the relationship found in multiple regression models.

Findings

The authors find that the concentrated ownership has a positive, albeit decreasing, association with firm performance. This relationship is conditioned on the identity of the largest investor. Those companies whose block investors were financial institutions performed better than their peers. The superior influence of financial investors on corporate performance did not disappear even when the endogeneity of this relationship was accounted for.

Originality/value

The main contribution of this paper is the finding of a differential influence of various identities of block investors on firm performance. It questions the role that some domestic block investors play in the governance of New Zealand companies and the reason why the financial system has allowed corporate entities to be the main shareholders of the majority of firms when they underperform relative to their peers.

Keywords

Citation

Boone, N., Colombage, S. and Gunasekarage, A. (2011), "Block shareholder identity and firm performance in New Zealand", Pacific Accounting Review, Vol. 23 No. 2, pp. 185-210. https://doi.org/10.1108/01140581111163999

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited