The Information Value of Stock Lending Fees: Are Lenders Price Takers?

Review of Finance, 21, 2353–2377, 2017

40 Pages Posted: 8 Dec 2016 Last revised: 28 Feb 2019

See all articles by Truong X. Duong

Truong X. Duong

Iowa State University - Department of Accounting and Finance

Zsuzsa R. Huszar

National University of Singapore ; Central European University

R.S.K. Tan

National University of Singapore

Weina Zhang

Department of Finance, National University of Singapore; National University of Singapore Risk Management Institute

Date Written: December 6, 2016

Abstract

We find that higher stock lending fees predict significantly lower future returns after controlling for shorting demand for U.S. stocks during the period 2007–2010. These results suggest that active institutional investors on the supply side play an important role in the return predictability of fees and they not only respond to demand but also price in additional information around earnings news announcements. Overall, we find evidence that stock lenders are informed and, together with short sellers, contribute to the price discovery process.

Keywords: Institutional ownership; Securities lending market; Short selling; Short-sale constraints

JEL Classification: G10, G12, G14

Suggested Citation

Duong, Truong X. and Huszar, Zsuzsa R. and Tan, Ruth Seow Kuan and Zhang, Weina, The Information Value of Stock Lending Fees: Are Lenders Price Takers? (December 6, 2016). Review of Finance, 21, 2353–2377, 2017, Available at SSRN: https://ssrn.com/abstract=2882493 or http://dx.doi.org/10.2139/ssrn.2882493

Truong X. Duong

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States

Zsuzsa R. Huszar (Contact Author)

National University of Singapore ( email )

Business School
15 Kent Ridge Drive
Singapore, 117592
Singapore
+65 6516 8017 (Phone)
+65 6779 2083 (Fax)

Central European University ( email )

Nador utca 9
Budapest, H-1051
Hungary

Ruth Seow Kuan Tan

National University of Singapore ( email )

1 Business Link
Singapore 117592, 117592
Singapore
65-65166265 (Phone)
65-67792083 (Fax)

Weina Zhang

Department of Finance, National University of Singapore ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore
65168120 (Phone)
67792083 (Fax)

HOME PAGE: http://bizfaculty.nus.edu/faculty-profiles/108-weina

National University of Singapore Risk Management Institute ( email )

21 Heng Mui Keng Terrace
Level 4
Singapore, 119613
Singapore

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