Institutional block-holdings of UK firms: do corporate governance mechanisms matter?

Abstract

Using a sample of UK firms, we find that institutional block-holding is negatively associated with directors’ ownership and is positively associated with board composition, suggesting that institutional block-holders regard directors’ ownership and board composition as substitute and complementary control mechanisms, respectively. We also show that UK institutional block-holders prefer smaller firms and firms with a shorter listing history. The presence of institutional block-holders is associated with smaller boards and lower trading liquidity. Finally, our results indicate that the investment preference of UK institutional block-holders varies with the level of their shareholding.