Hostname: page-component-f554764f5-68cz6 Total loading time: 0 Render date: 2025-04-10T16:34:04.141Z Has data issue: false hasContentIssue false
  • English
  • Français

Blockholder Ownership and Market Liquidity

Published online by Cambridge University Press:  06 April 2009

Frank Heflin  and
Kenneth W. Shaw
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the association between block ownership and market liquidity. Blockholders are believed to have access to private, value-relevant information via their roles as monitors of firms' operations. consistent with this, we find that firms with greater blockholder ownership, either by managers or external entities, have larger quoted spreads, effective spreads, adverse selection spread components, and smaller quoted depths.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 35 , Issue 4 , December 2000 , pp. 621 - 633
Copyright
Copyright © School of Business Administration, University of Washington 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

Footnotes

*

Krannert Graduate School of Management, Purdue University, West Lafayette, IN 47907, and robert H. Smith School of Business, 4467 Van Munching Hall, University of Maryland, College Park, MD 20742, respectively. Heflin thanks the Yale School of Management and the Krannert Graduate School of Management for financial support. Shaw gratefully acknowledges financial support from the Smith School of Business, University of Maryland. the authors thank William Kross, Jonathan Karpoff (the editor), and Dennis Scheehan (the referee) for helpful comments and suggestions.

References

Affleck-Graves, J.; Hedge, S.; and Miller, R.. “Trading Mechanisms and the Components of the Bid-Ask Spread.” Journal of Finance, 49 (1994), 1471–1488.10.2307/2329194Google Scholar
Amihud, Y., and Mendelson, H.. “Dealership Markets; Market Making with Inventory.” Journal of Finance Economics, 8 (1980), 31–53.10.1016/0304-405X(80)90020-3CrossRefGoogle Scholar
Amihud, Y., and Mendelson, H.. “Asset Pricing and the Bid-Ask Spread.” Journal of Finance Economics, 17 (1986), 223–249.10.1016/0304-405X(86)90065-6CrossRefGoogle Scholar
Barclay, M., and Holdemess, C.. “Negotiated Block Trades and Corporate Control.” Journal of Finance, 46 (1991), 861–878.10.2307/2328546CrossRefGoogle Scholar
Belsley, D. A.; Kuh, E., and Welsh, R. E.. Regression Diagnostics, New York, NY; John Wiley and Sons (1980).10.1002/0471725153CrossRefGoogle Scholar
Bethel, J.; Liebeskind, J. P.; and Opler, T.. “Block Share Purchases and Corporate Performance.” Journal of Finance, 53 (1998), 605–653.10.1111/0022-1082.244195CrossRefGoogle Scholar
Chalmers, J. M. R., and Kadlec, G. B.. “An Empirical Examination of the Amortized Spread.” Journal of Finance Economics, 48 (1998), 159–188.10.1016/S0304-405X(98)00007-5CrossRefGoogle Scholar
Chiang, R., and Venkatesh, P. C.. “Insider Holdings and Perceptions of Information Asymmetry: A Note.” Journal of Financen, 43 (1988), 1041–1048.10.2307/2328153CrossRefGoogle Scholar
Copeland, T., and Galai, D.. “Information Effects on the Bid-Ask Spread.” Journal of Finance, 25 (1983), 383–417.Google Scholar
Corwin, S. “Differences in Trading Behavior across NYSE Specialist Firms.” Journal of Finance, 54 (04 1999), 721–745.10.1111/0022-1082.00123CrossRefGoogle Scholar
Demsetz, H., Lehn, K.. “The Structure of Corporate Ownership: Causes and Consequences.” Journal of Political Economy, 93 (1985), 1155–1177.10.1086/261354CrossRefGoogle Scholar
Denis, D., and Sarin, A.. “Ownership and Board Structures in Publicly Traded Corporations.” Journal of Financial Economics, 52 (1999), 187–223.10.1016/S0304-405X(99)00008-2CrossRefGoogle Scholar
Glosten, L. R., and Harris, L. E.. “Estimating the Components of the Bid-Ask Spread.” Journal of Financial Economics, 21 (1988), 123–142.10.1016/0304-405X(88)90034-7CrossRefGoogle Scholar
Glosten, L. R., and Milgrom, P. R.. “Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders.” Journal of Financial Economics, 14 (1985), 71–100.10.1016/0304-405X(85)90044-3CrossRefGoogle Scholar
Hanley, K. W.; Kumar, A. A.; and Seguin, P. J.. “Price Stabilization in the Market for New issues.” Journal of Financial Economics, 34 (1993), 177–197.10.1016/0304-405X(93)90017-6CrossRefGoogle Scholar
Hausman, J. “Specification Tests in Econometrics.” Econometrica, 46 (1978), 1251–1272.10.2307/1913827CrossRefGoogle Scholar
Heflin, F., and Shaw, K.. “Adverse Selection, Inventory Holding Costs, and Depth.” Journal of Financial Research (forthcoming 2001).CrossRefGoogle Scholar
Huang, R. D., and Stoll, H. R.. “The Components of the Bid-Ask Spread: A General Approach.” Journal of Financial Studies, 10 (1997), 995–1034.10.1093/rfs/10.4.995CrossRefGoogle Scholar
Krinsky, I., and Lee, J.. “Earnings Announcements and the Components of the Bid-Ask Spread.” Journal of Finance, 51 (1996), 1523–1535.10.2307/2329403Google Scholar
Lee, C.; Mucklow, B.; and Ready, M.. “Spreads, Depths, and the Impact of Earnings Information: An Intraday Analysis.” Review of Financial Studies, 6 (1993), 345–374.10.1093/rfs/6.2.345CrossRefGoogle Scholar
Lee, C., and Ready, M.. “Inferring Trade Direction from Intraday Data.” Journal of Finance, 45 (1991), 733–746.Google Scholar
Lin, J.; Sanger, G.; and Booth, G. G.. “Trade Size and Components of the Bid-Ask Spread.” Review of Financial Studies, 8 (1995), 1153–1183.10.1093/rfs/8.4.1153CrossRefGoogle Scholar
Madhavan, A.; “Trading Mechanisms in Securities Markets,” Journal of Finance, 52 (1992), 607–641.10.2307/2329117CrossRefGoogle Scholar
Madhavan, A.; Richardson, M.; and Roomans, M.. “Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks.” Review of Financial Studies, 10 (1997), 1035–1064.10.1093/rfs/10.4.1035CrossRefGoogle Scholar
Madhavan, A., and Smidt, S.. “An Analysis of Changes in Specialist Inventories and Quotations.” Journal of Finance, 48 (1993), 1595–1628.10.2307/2329061CrossRefGoogle Scholar
MeConnell, J. J. and Servaes, H.. “Additional Evidence on Equity Ownership and Corporate Value.” Journal of Financial Economics, 25 (1990), 595–613.10.1016/0304-405X(90)90069-CCrossRefGoogle Scholar
Moreck, R.; Shleifer, A.; and Vishny, R.. “Management Ownership and Market Valuation: An Empirical Analysis.” Journal of Financial Economics, 20 (1988), 293–315.10.1016/0304-405X(88)90048-7CrossRefGoogle Scholar
Sarin, A.; Shastri, K. A.; and Shastri, K.. “Ownership Structure and Stock Market Liquidity.” Working paper, Santa Clara Univ. and Univ. of Pittsburgh (1999).Google Scholar
Stoll, H. R. “The Supply of Dealer Services in Securities Markets.” Journal of Finance, 33 (1978), 1133–1151.10.2307/2326945CrossRefGoogle Scholar
Stoll, H. R. “Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests.” Journal of Finance, 44 (1989), 115–134.10.2307/2328278Google Scholar
White, H. “A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity.” Econometrica, 48 (05 1980), 817–838.10.2307/1912934CrossRefGoogle Scholar
Wu, D. “Alternative Tests of Independence between Stochastic Regressors and Disturbances.” Econometrica, 41 (1973), 733–750.10.2307/1914093CrossRefGoogle Scholar