The structure of Spanish capital markets does not facilitate an efficient market for corporate control through takeover process, which assumes that inefficient management is replaced by competing teams. The ownership structure of listed companies is highly concentrated, with extremely low floating stock for some companies. At the same time an important number of companies have introduced anti-takeover provisions in their statutes.There is another way of disciplining management through the exit solution: by transferring the ownership of significant blocks of shares, a market for partial corporate control, as alternative to the takeover market. The objective of this paper is to test empirically the causes and consequences of block purchases in Spain for non-financial listed companies. The main results are: i) There is no evidence that previous poor performance of the companies causes block increases; ii) Block increases occur more frequently in companies with lower ownership concentration. After the block increase, on average, the ownership of the largest shareholder increases. iii) After block increases there are significant board changes,for both executive board members and also for non-executives. (iv) The transfer of blocks occurs more frequently for smaller companies.We conclude that agency theory predictions about the disciplining role of partial takeover activity are not fully supported. They are contingent on institutional characteristics of the corporate governance system. © 2002 Kluwer Academic Publishers.
- Block transfers