Re-measuring agency costs: The effectiveness of blockholders

This study examines the effectiveness of blockholders in mitigating agency costs such as managerial extravagance, poor asset management and underinvestment. Our evidence suggests that outside and inside blockholders exert their interventions differently. We find that outside blockholders are more vigilant about mitigating managerial extravagance while inside blockholders, especially managerial blockholders, are more effective in improving the efficiency of firm asset utilization. However, only managerial blockholders significantly overcome underinvestment problems, which may be attributable to their duality roles.