Large shareholders as monitors : is there a trade-off between liquidity and control?


Maug, Ernst


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DOI: https://doi.org/10.1111/0022-1082.35053
URL: https://ub-madoc.bib.uni-mannheim.de/44713
Additional URL: https://onlinelibrary.wiley.com/doi/full/10.1111/0...
URN: urn:nbn:de:bsz:180-madoc-447137
Document Type: Article
Year of publication: 1998
The title of a journal, publication series: The Journal of Finance
Volume: 53
Issue number: 1
Page range: 65-98
Place of publication: Hoboken, NJ [u.a.]
Publishing house: Wiley
ISSN: 0022-1082 , 1540-6261
Publication language: English
Institution: Business School > ABWL u. Corporate Finance (Maug)
License: CC BY 4.0
Subject: 330 Economics
Abstract: This paper analyzes the incentives of large shareholders to monitor public corporations. We investigate the hypothesis that a liquid stock market reduces large shareholders’ incentives to monitor because it allows them to sell their stocks more easily. Even though this is true, a liquid market also makes it less costly to hold larger stakes and easier to purchase additional shares. We show that this fact is important if monitoring is costly: market liquidity mitigates the problem that small shareholders free ride on the effort of the large shareholder. We find that liquid stock markets are beneficial because they make corporate governance more effective.

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Maug, Ernst (1998) Large shareholders as monitors : is there a trade-off between liquidity and control? Open Access The Journal of Finance Hoboken, NJ [u.a.] 53 1 65-98 [Article]
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