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Equity lending markets and ownership structure

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Author Info

  • Saffi, Pedro A.C.

    ()
    (IESE Business School)

  • Sturgess, Jason

    (McDonough School of Business)

Abstract

Using proprietary data on equity lending supply, loan fees and quantities, we examine the link between institutional ownership structure and the market for equity lending and stock prices. We find that both total institutional ownership and ownership concentration (measured by the Herfindahl index, single largest holding and number of investors) are important determinants of equity lending supply and short sale constraints. More concentrated ownership structures increase short sale constraints (including loan fees, recall risk and arbitrage risk) and force arbitrageurs to decrease demand for equity borrowing and demand greater compensation for borrowing stock. The results suggest that the impact of institutional ownership structure in the equity lending market may create limits to arbitrage.

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Bibliographic Info

Paper provided by IESE Business School in its series IESE Research Papers with number D/836.

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Length: 48 pages
Date of creation: 09 Nov 2009
Date of revision:
Handle: RePEc:ebg:iesewp:d-0836

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Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
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Related research

Keywords: Equity lending markets; short selling; ownership structure; lending supply;

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