OWNERSHIP CONCENTRATION, CORPORATE-CONTROL ACTIVITY, AND FIRM VALUE -EVIDENCE FROM THE DEATH OF INSIDE BLOCKHOLDERS

We analyze how ownership concentration affects firm value and control of public companies by examining effects of deaths of inside blockhold ers. We find shareholder wealth increases, ownership concentration fal ls, and extensive corporate control activity ensues. Share price respo nses are related to the deceased's equity stake. Control group holding s fall for two-thirds of the firms due to either the estate's dispersa l or inheritors selling stock. A majority of firms become targets of c ontrol bids: three-quarters of bids are successful; one-third are host ile. Our evidence is broadly consistent with Stulz's (1988) model of t he relationship between ownership concentration and firm value.