TY - JOUR
T1 - Ownership structure, limits to arbitrage, and stock returns
T2 - evidence from equity lending markets
AU - Prado, Melissa Porras
AU - Saffi, Pedro A.C.
AU - Sturgess, Jason
N1 - Funding agency: Spanish Ministry of Science and Innovation at the Public-Private Sector Research Center at IESE Business School (grant nr. ECO2008-05155)
PY - 2016/1/1
Y1 - 2016/1/1
N2 - We examine how institutional ownership structure gives rise to limits to arbitrage through its impact on short-sale constraints. Stocks with lower, more concentrated, short-term, and less passive ownership exhibit lower lending supply, higher costs of shorting, and higher arbitrage risk. These constraints limit the ability of arbitrageurs to take short positions and delay the correction of mispricing. Stocks with more concentrated ownership exhibit smaller announcement day reactions, larger post-earnings announcement drift, and an additional negative abnormal return of -0.47% in the week following a positive shorting demand shock.
AB - We examine how institutional ownership structure gives rise to limits to arbitrage through its impact on short-sale constraints. Stocks with lower, more concentrated, short-term, and less passive ownership exhibit lower lending supply, higher costs of shorting, and higher arbitrage risk. These constraints limit the ability of arbitrageurs to take short positions and delay the correction of mispricing. Stocks with more concentrated ownership exhibit smaller announcement day reactions, larger post-earnings announcement drift, and an additional negative abnormal return of -0.47% in the week following a positive shorting demand shock.
UR - http://www.scopus.com/inward/record.url?scp=85014202600&partnerID=8YFLogxK
U2 - 10.1093/rfs/hhw058
DO - 10.1093/rfs/hhw058
M3 - Article
AN - SCOPUS:85014202600
SN - 0893-9454
VL - 29
SP - 3211
EP - 3244
JO - Review Of Financial Studies
JF - Review Of Financial Studies
IS - 12
ER -