Public Trading and Private Incentives
AbstractThis paper studies the link between public trading and the activity of a firms large shareholder who can affect firm value. Public trading results in the formation of a stock price that is informative about the large shareholders activity. This increases the latters incentives to engage in value increasing activities. Indeed, if he has to liquidate part of his stake before the effect of his activity is publicly observed, a more informative price rewards him for his activity. Implications of this perspective are derived for the decision to go public and security design.
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Bibliographic InfoPaper provided by Financial Markets Group in its series FMG Discussion Papers with number dp347.
Date of creation: Mar 2000
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Web page: http://www.lse.ac.uk/fmg/
Other versions of this item:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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