Public Trading and Private Incentives
This 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.
When requesting a correction, please mention this item's handle: RePEc:fmg:fmgdps:dp347. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The FMG Administration)
If references are entirely missing, you can add them using this form.