Short Sales and Shareholders' Unanimity

Jean-Marc Bottazzi, Mario Pascoa and Guillermo Ramírez
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Jean-Marc Bottazzi: Paris School of Economics and Capula

No 516, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: Short sales collided with Makowski's (1983) view that shareholders' unanimity follows from the competitiveness of the rm in the stock market. However, once short sales are properly modelled, requiring the shares to be borrowed beforehand, unanimity can be restored. Short sales are no longer an externality and have a price: the lending fee. Unanimity prevails under perfectly elastic demands by both shareholders and shareborrowers. This requires the rm's shares not to be on special. Stock prices re ect the evaluation by shareholders who did not entirely encumber their shares or shareborrowers who did not fully re-use the shares that they possess.

Pages: 51 pages
Date: 2016-03
New Economics Papers: this item is included in nep-sog
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0516

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