families shareholder

A third category of the potential largest shareholder includes individuals/families and private equity funds under the rubric of private investor. Pound (1992) and Klein and Zur (2009) discuss the active private investor, whom they describe as an investor who buys stakes in publicly held corporations with the intention of bargaining with existing management (or become the new management) to bring about productive change and thereby raise profits (Klein and Zur, 2009). This type of investor usually plays a double role in firms, as both owner and manager. Unlike the previous types of shareholders, private investors act on their own behalf and, since they have specific human and financial capital at stake in the firm, they are more likely to obtain as much firm control as they can (Maug 1996; Thomsen and Pedersen, 2000). Gedajlovic and Carney (2009) state that given that individual/family investors are prevalent in most countries, it attests that this ownership type must have certain comparative  advantage over other alternatives, justifying their ownership concentration behavior. Likewise, family owners typically seek to keep the firms into family hands by maintaining majority ownership in the firm as a way to minimize uncertainty in securing family succession (Anderson, Mansi, and Reeb, 2003; Casson, 1999; James, 1999; Martínez, Stöhr, and Quiroga, 2007). And, to the extent that families are able to maintain the continuity of the business by transferring its asset to future generations, the market value of the firm can be increased (James, 1999). In a similar fashion, private equity funds acquire control in companies to ensure that their strategic concerns can be implemented with minimal uncertainty (Cornelli and Karakas, 2008). They use their expertise in corporate restructurings and their contacts throughout the industry to enhance firm value, and, when needed, can use their control to swiftly modify company policies, remove underperforming executives, or challenge management to perform better and reduce firm uncertainty (Masulis and Thomas, 2009: 223). Given the particularity of strategic and private investors objectives and strategies, and their awareness and interest to reduce uncertainties, we propose that, they are likely to seek higher ownership concentration of publicly listed firms than institutional investors, and hence hypothesize: Hypothesis 2a. Strategic blockholders and private investors, when they are the largest shareholders, are expected to have higher ownership concentration than institutional shareholders.