Equity lending markets and ownership structure

Pedro Saffi and Jason Sturgess
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Jason Sturgess: McDonough School of Business
Authors registered in the RePEc Author Service: Melissa Porras Prado ()

No D/836, IESE Research Papers from IESE Business School

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.

Keywords: Equity lending markets; short selling; ownership structure; lending supply (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 G18 G28 G32 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2009-11-09
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-fmk
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ebg:iesewp:d-0836

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