Three Studies on Shareholder Heterogeneity

  • Tianshu Ma

Student thesis: Phd


In this thesis, I report three self-contained studies investigating specific types of shareholders’ roles and functions in corporate governance as well as their informed trading behaviour in the context of loss-making firms (or relative to profit-making firms). The first essay explores the impact of corporate block ownership on investment efficiency, while in the last two essays, I examine informed trading engaged by institutional investors and corporate insiders, in loss-making firms [during economic policy uncertainty (EPU) periods], respectively. Overall, these essays contribute to the understanding of shareholder heterogeneity and the informed trading behaviour conducted by certain types of shareholders. The first essay investigates the impact of corporate block ownership on firm-level investment efficiency. Exploiting an international sample from 49 countries/regions over the period 2004-2020, I find that corporate block ownership enhances investment efficiency. Cross-sectional analysis and a quasi-natural design based on MiFID regulation implementation provide evidence to alleviate endogeneity issues. Furthermore, I find that the relationship between corporate block ownership and investment efficiency mainly exists in firms with more information asymmetry (i.e., firms as market followers or with lower accounting quality). To sum up, these results corroborate the monitoring hypothesis that corporate block ownership acts as an explicit governance mechanism to mitigate market frictions, and bring attention to corporate block ownership that has been generally overlooked in the corporate governance research. In the second essay, I explore whether investors misunderstand loss persistence from the perspective of institutional investors. Motivated by the shareholder heterogeneity literature that institutional investors are different in knowledge, sophistication and information processing capabilities, I provide evidence that institutional investors who are transient, tax-insensitive, with fiduciary responsibilities, or short-term oriented trade shares based upon predicted loss persistence as they seem to understand loss persistence ex ante, whereas their counterparts - institutional investors who are non-transient, tax-sensitive, with non-fiduciary responsibilities or long-term oriented - do not adjust their shareholdings based upon loss persistence. I also find that these changes in institutional shareholdings are positively associated with cumulative abnormal returns around subsequent earnings announcements. Overall, the results suggest that only specific types of institutional investors understand and trade upon information about loss persistence, and general investors in the capital market may not understand the rational institutional trading behaviour until forthcoming earnings announcements because of the mixed trading patterns amongst institutional investors. The third and final essay examines how EPU affects insider trading in loss-making firms. I find that insiders in loss-making firms sell more shares during EPU periods than profit-making firms. Within loss-making firms, the extent of insider purchases and sales associated with EPU is larger in persistent loss-making firms [with low research and development expenses (R&D)] than transitory loss-making firms. This evidence indicates that corporate insiders exploit information advantages during EPU periods to engage in insider trading, especially in relatively disadvantaged firms due to higher information asymmetry between insiders and outsiders. Overall, this study sheds light on the effect of EPU on insider trading in the loss-making firms setting.
Date of Award1 Aug 2022
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorAndrew Stark (Supervisor) & Wei Jiang (Supervisor)


  • Corporate Governance
  • Financial Reporting
  • Loss-making Firms

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