shareholder composition

Does The Shareholder Composition Of A Company Matter?

We did an article on this but for those who missed interesting topic in corp governance, see more below.

Does The Shareholder Composition Of A Company Really Matter?

By Anne Beyer, David F. Larcker, and Brian Tayan

July 31, 2014

The Influence Of Shareholders

Shareholders are not a homogenous group. They include a diverse mix of institutional and retail investors that differ in terms of investment horizon (long-term versus short-term), objectives (purely economic versus social objectives), level of activity (active versus passive), portfolio concentration, and size.

Most corporations dedicate significant time and attention to managing their shareholder base. A recent survey by the National Investor Relations Institute (NIRI) and the Rock Center for Corporate Governance at Stanford University finds that 91 percent of companies discuss shareholder composition at the senior-executive level; 75 percent discuss this at the board level. CEOs spend 4.2 days per quarter managing their shareholder base, and CFOs 6.4 days—considerable figures given the managerial responsibilities of senior leaders. Most companies (80 percent) believe that their stock would trade at a higher price if they could attract their “ideal” shareholder base. On average, companies estimate that their stock would rise 15 percent and share price volatility decrease 20 percent over a two to three year period if they had the right shareholders.

Furthermore, companies overwhelmingly prefer “long-term shareholders” to “short-term shareholders.” Ninety-two percent of companies in the NIRI/Rock Center study describe their ideal shareholder as having a “long-term investment horizon”-the most highly rated among all attributes surveyed. They describe long-term shareholders as having an investment horizon of at least 2.8 years. Respondents believe that investors with a short-term perspective distract from strategic decision making (65 percent) and focus on cost reduction (51 percent).

A majority (57 percent) believes that a company whose shareholder base is dominated by short-term investors will have reduced market growth and/or reduced long-term growth (see Exhibit 1). Some prominent investor groups, too, share these concerns (see Exhibit 2).

shareholder composition

shareholder composition


See full Does The Shareholder Composition Of A Company Really Matter? in PDF format here.


Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Welcome in the new year by signing up up for ValueWalkPremium today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 1/31/2019 or after next 30 23 subscribers take advantage whichever comes first – please do not share this discount with others