Short Sales and Shareholders' Unanimity
Mario Pascoa and
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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
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
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0516
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