The Trade-Off Between Liquidity and Control Revisited

Antonio S. Mello and Rafael Repullo

Working Papers from CEMFI

Abstract: This paper reexamines the analysis in Maug (1998) on the relationship between market liquidity and large shareholder activism. Taking explicitly into account the effect of a majority requirement for intervention in the management of a firm, we show that, contrary to Maug's claim, there is a range of parameter values for which increases in market liquidity decrease the probability of intervention.

Date: 1999
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Working Paper: The Trade-Off Between Liquidity and Control Revisited (1999)
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