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Abstract Firms that strive to innovate (i.e., firms that invest in research and development—R&D) have high potential for economic sustainability due to the possibility of generating new platforms of growth and future revenue. However, it is little understood whether financial markets incorporate (if at all) information on firms' potential for economic sustainability. After all, firms' information on R&D investments is very opaque. This poses a challenge to investors to incorporate into firm value any economic sustainability emanating from such information. We investigate whether blockholders, owners with at least a 5% shareholding in a firm, help reflect in firm value the firms' potential for economic sustainability. We find that active blockholders, rather than passive blockholders, help incorporate in firm value the potential for economic sustainability. Thus, active blockholders help mitigate agency problems in firms and help financial markets digest firms' potential for economic sustainability.
Kyaw et al. (2022) studied this question.