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Block Ownership, Investment and Uncertainty: Evidence from U.S. Firms

We study how macroeconomic, firm-level and higher-order uncertainty affects real corporate investment in firms with different levels of active and passive block ownership. Our ownership data are extracted from statutory SEC filings that block-holders are required to file indicating their active or passive status. Our main results are as follows. First, investment is more sensitive, to firm-level compared to macroeconomic and higher-order uncertainty shocks. Second, one standard deviation change in all types of uncertainty shocks has a higher negative effect on investment rate for firms held by active block-holders than for those held by passive block holders. Higher-order uncertainty has the most negative impact followed by macro-economic and firm-level uncertainty. Third, using a Bartik-style instrument for firm-level uncertainty we find that our main results still hold. Taken together, these results imply that the stated intentions of block-holders in statutory filings have an impact on how firm investment reacts to future economic uncertainty. Our results have implications for the current debate about the effects of ownership concentration in publicly listed firms.