The Impact of Controlling Shareholder Diversification on the Firm

In this study we use direct estimates of the diversification of the largest shareholder in a firm to study the impact of shareholder diversification on the firm. Overall, we find that under diversified controlling shareholders value control very highly. However, there is limited evidence that the lack of diversification harms other shareholders. Controlling shareholders appear to use debt, dual class shares and corporate transactions to strategically trade off the private benefits of control and the drawback of poor portfolio diversification