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Blockholder Ownership and Market Liquidity

Published online by Cambridge University Press:  06 April 2009

Frank Heflin  and
Kenneth W. Shaw
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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

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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.

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