Director Holdings, Shareholder Concentration and Illiquidity

41 Pages Posted: 4 May 2005

See all articles by Carole Comerton-Forde

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

James Rydge

Grantham Research Institute on Climate Change and the Environment

Date Written: January 2006

Abstract

This paper examines the relationship between stock ownership concentration and illiquidity, using comprehensive shareholding data from companies listed on the Australian Stock Exchange. Ownership concentration is positively related to illiquidity. Analysis of individual shareholder types extends our understanding of this relationship. The results indicate that low levels of inside holdings have a positive impact on liquidity, while high levels reduce liquidity. Retail shareholders have a small, but positive, impact on liquidity. Institutional shareholdings enhance turnover. However, institutional shareholdings do not alleviate information asymmetry and do not reduce spreads.

Keywords: Ownership concentration, illiquidity, insiders, directors, retail investors

JEL Classification: G32

Suggested Citation

Comerton-Forde, Carole and Rydge, James, Director Holdings, Shareholder Concentration and Illiquidity (January 2006). Available at SSRN: https://ssrn.com/abstract=713181 or http://dx.doi.org/10.2139/ssrn.713181

Carole Comerton-Forde

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

James Rydge (Contact Author)

Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

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