The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Block Share Purchases and Corporate Performance
Published: 12/17/2002 | DOI: 10.1111/0022-1082.244195
Jennifer E. Bethel, Julia Porter Liebeskind, Tim Opler
This paper investigates the causes and consequences of activist block share purchases in the 1980s. We find that activist investors were most likely to purchase large blocks of shares in highly diversified firms with poor profitability. Activists were not less likely to purchase blocks in firms with shark repellents and employee stock ownership plans. Activist block purchases were followed by increases in asset divestitures, decreases in mergers and acquisitions, and abnormal share price appreciation. Industry‐adjusted operating profitability also rose. This evidence supports the view that the market for partial corporate control plays an important role in limiting agency costs in U.S. corporations.