The Trade-Off between Liquidity and Control Revisited

CEMFI Working Paper 9912

Posted: 3 Jan 2000

See all articles by Antonio S. Mello

Antonio S. Mello

University of Wisconsin - Madison - Department of Finance, Investment and Banking

Rafael Repullo

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: October 1999

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.

JEL Classification: G30, G32, G34

Suggested Citation

Mello, Antonio S. and Repullo, Rafael, The Trade-Off between Liquidity and Control Revisited (October 1999). CEMFI Working Paper 9912. Available at SSRN: https://ssrn.com/abstract=189328

Antonio S. Mello

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-3423 (Phone)
608-265-4195 (Fax)

Rafael Repullo (Contact Author)

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91429 0551 (Phone)
+34 91429 1056 (Fax)

HOME PAGE: http://www.cemfi.es/~repullo/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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