The Price Effects of the Disclosure of Significant Holdings in Listed Companies : The Case of Groups Acting in Concert

Starting with an outline of the way in which Swiss Stock Exchange Law treats "shareholder groups", this paper analyzes the announcement effects of major shareholdings in the Swiss stock market as reported by the SIX Swiss Exchange database on "significant shareholders" in the time period from January 1, 2008 to December 31, 2010. This includes a total of 3,617 announcements. By applying specific selection criteria, a sample of 218 announcements was collected for use in the empirical analysis, covering 61 individual investors and 32 groups of investors acting in concert. We test the hypothesis that the disclosure notifications of major shareholders have a significant impact on equity pricing for the validity of its proposition. In particular, we test whether information related to groups acting in concert is priced differently from information related to individual investors. We analyze the (cumulative) abnormal returns occurring around official announcements to investigate these issues.

Our empirical results reveal that the announcement effects of group-related disclosures are statistically and economically significant; the significance of the results strongly increases after January 2009 when the SIX Swiss Exchange launched a new electronic publication platform, thereby enabling a more immediate release of information. In the preceding sample period, the price effects are scattered over the days prior to the announcement date which makes it difficult to identify the effects. With the introduction of the new publication platform, the pre-announcement effects virtually disappear. Also, the difference between the stock price reactions between announcements related to single individuals and to groups is striking in the post-2009 sample. Furthermore, we find rather heterogeneous price patterns within both the "purchase" and the "sale" announcement categories. For example, the price effects of the "sale" sample are largely dominated by the valuation effects caused by the breakup (dissolutions) of controlling groups.