Who Benefits in an Insider Negotiated Block Trade?

We examine insider negotiated block trades to investigate whether new active blockholders with special expertise create shareholder value. In contrast to existing studies, we find no reliable overall evidence of permanent stock price increases, operating changes, or improved net of industry profitability associated with these major control changes. Top executive turnover is extensive, but appears largely attributable to the block sellers actions, not the imposition of discipline by the block buyer. Results suggest initial shareholder gains anticipate takeovers, not improvements in profitability. When a takeover is not forthcoming, the gain disappears.