The duration of equity ownership at the Oslo Stock Exchange 1989-1999

Abstract

To date little is known about how long equity ownership lasts, what determines its length, and whether ownership duration is related to rm performance. Using a unique time series of equity holdings over eleven years, we nd that on average the rm's largest owner stays less than three years and stays longer than owners with smaller stakes. The duration of nancial institutions and foreigners is shorter than that of individuals and industrial rms. We show that ownership duration is duration dependent as the probability of closing an equity position is a function of how long the owner has held the stake. Ownership duration appears to match the duration of the rm's investment projects. We nd no evidence that large owners vote by foot in the sense that bad news about earnings leads to duration ending. There is a negative relationship between ownership duration and a rm's performance in general, but the sign and strength of this relationship di ers across owner types. Long duration by nancial institutions and industrial corporations is negatively related to performance, whereas the opposite is true for individuals. This suggests that long term ownership may improve rm performance if the monitoring is direct as opposed to delegated.