Individual Shareholder Homogeneity as a Driver of Returns: An Empirical Analysis of the Implications of Individual Shareholder Similarity on Stock Returns

Abstract

This thesis investigates the effect of homogeneous individual shareholders on firm performance by analyzing stock returns. Using a sample of Norwegian listed companies from 2014-2023, we calculate measures of shareholder similarity, capturing age, ownership concentration, and nationality. Evidence suggests that a homogeneous shareholder base has a significant impact on a company's stock returns, specifically when investors are of similar age. The conditional effect of ownership concentration suggests that individual homogeneous shareholders are less impactful in the presence of blockholders. Sufficient homogeneity allows individual shareholders to unintentionally act in unison, thereby ascertaining the governing role of larger blockholders through a credible threat or the occurrence of mass exit. This effect is significantly more pronounced in smaller, less recognized firms. Conversely, a theoretical review suggests that the stock of large, well-renowned firms is too liquid to be affected by passive governance through shareholder exit. The thesis culminates in an analysis of portfolios based on shareholder characteristics. The effect of homogeneous individual shareholders is predictable and persistent enough to serve as a basis for static portfolios. These portfolios outperform the OSEBX benchmark index over the sample period, yet are accompanied by higher volatility. Overall, the thesis provides valuable insight into the effect of individual shareholder characteristics, a relatively unexplored topic.