The Trade-Off between Liquidity and Control Revisited
CEMFI Working Paper 9912
Posted: 3 Jan 2000
Date Written: October 1999
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.
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation