Are liquidity and corporate control priced by shareholders? Empirical evidence from Swiss dual class shares

Gardiol, Lucien; Gibson-Asner, Rajna; Tuchschmid, Nils S.

doi:10.1016/s0929-1199(97)00002-3

Cited by 43 publications

(20 citation statements)

References 17 publications

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“…As we just argued, transaction costs also have an indirect effect, which arises from 7 The amortized spread equals the product of the effective spread and the number of shares traded summed over all trades for each day, and expressed as an annualized fraction of equity value. 6 Papers that document a similar negative relation between stock prices and size of the investor clientele include Gardiol et al (1997) andadegaard (2002). 8 To see why, ignore interest rates and assume that investors trade a pot that contains $1000, which can be distributed at year-end.…”

Section: Limited Liquidity and The Bid-ask Spreadmentioning

confidence: 99%

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The pricing discount for limited liquidity: evidence from SWX Swiss Exchange and the Nasdaq

Loderer

Roth

2005

Journal of Empirical Finance

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We investigate the pricing discount for limited liquidity. Unlike previous studies that have examined the relation between historical returns and liquidity, ours looks directly at current stock prices. This approach requires less data and yields up-to-date information about limited liquidity discounts. We analyze data from the Swiss exchange and the Nasdaq during 1995-2001, and find a statistically and economically significant price-liquidity relation in both markets. We test the robustness of that relation with a procedure that does not rely on specific distributional assumptions. Our findings are unaffected. According to the evidence, the median discount can reach 30%. D 2004 Elsevier B.V. All rights reserved. JEL classifications: G12; G31

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Section: Limited Liquidity and The Bid-ask Spreadmentioning

confidence: 99%

“…The results are virtually unchanged when we measure LNSIZE by the market capitalization on June 30, 2000 instead.13 Evidence of a liquidity effect in Swiss stock prices is reported inGardiol et al (1997). They measure liquidity as the fraction of bearer shares in the capital structure.…”

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confidence: 94%

The pricing discount for limited liquidity: evidence from SWX Swiss Exchange and the Nasdaq

Loderer

Roth

2005

Journal of Empirical Finance

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“…The premium is in some cases adjusted for partial voting rights. [1988] 1978-83 24% Gardiol et al [1997] 1980-88 25% 1989-92 5% Sweden Rydqvist [1996] 1983-90 12% UK Megginson [1990] 1955-82 13% USA Lease et al [1983] 1940-78 5% DeAngelo and DeAngelo [1985] equities with superior voting power are trading at a premium. These types of results are often used as evidence for the presence of private benefits of control.…”

Section: Potential Explanations For Price Differencesmentioning

confidence: 99%

Price differences between equity classes. Corporate control, foreign ownership or liquidity?

Ødegaard

2007

Journal of Banking & Finance

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Price differences between equities of different classes have long been of interest to financial economists. Price differences between voting and nonvoting equity have, for example, been used as evidence for the existence of private benefits of control. The main potential theoretical explanations for observed price differences are: value of control, foreign ownership restrictions and liquidity differences. In this paper we consider the case of Norway. The Norwegian case is instructive because of a natural experiment due to changes in regulation. In the Norwegian equity market there are significant price differences. The nature of the differences change over time. In the early part of the period nonvoting shares traded at a significant premium to voting shares, indicating that restrictions on foreign ownership were the most important determinant of observed price differences, dominating explanations based on voting power. As soon as restrictions on foreign ownership of Norwegian stocks were lifted, voting shares started trading at a premium to nonvoting.

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“…The composition of each portfolio is illustrated in table 1. The rationale for selecting three size-based portfolios is based on empirical studies in Switzerland (in particular, see Gardiol, Gibson and Tuchschmid (1997)) which have shown that middle and small capitalization stocks display significantly different ownership and control characteristics which affect their return distributions. The stocks in each Group were also selected in order to reflect diversity across economic sectors.…”

Section: Are Derivatives' Listings Redundant?mentioning

confidence: 99%

The effects of newly listed derivatives in a thin stock market

Bruand

Gibson-Asner

1998

Rev Deriv Res

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Abstract. This study examines the informational feedback effects associated to the listing and trading of derivatives in Switzerland. The observed changes in the price and higher moments of stock returns are representative of a thin stock market. The listing of stock options and index futures generated positive abnormal returns for large stocks and for the index while small stocks essentially benefited from the launching of index options. While reducing the variance of blue chips and of the index, their variance's stochasticity increased (decreased) at index options' (futures) listings. Finally, we detect significant stock and index derivatives' price leads which do not however generate arbitrage opportunities.

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Are liquidity and corporate control priced by shareholders? Empirical evidence from Swiss dual class shares

Cited by 43 publications

References 17 publications

The pricing discount for limited liquidity: evidence from SWX Swiss Exchange and the Nasdaq

The pricing discount for limited liquidity: evidence from SWX Swiss Exchange and the Nasdaq

Price differences between equity classes. Corporate control, foreign ownership or liquidity?

The effects of newly listed derivatives in a thin stock market

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