Journal of Financial and Quantitative Analysis

This paper investigates whether management stock ownership and large non-management blockholder share ownership are related to firm value across a sample of 1433 firms from 18 emerging markets. When a management group's controlling exceed its cash flaw rights, I find that firm values are lower. I also find that large non-management control limits blockholdings are positively related to firm value. Both of these effects are significantly more pronounced in countries with low shareholder protection. One interpretation of these results is that external shareholder protection mechanisms play a role in restraining managerial agency costs and that large non-management blockholders can act as a partial substitute for missing institutional governance mechanisms.