Crushed by a rational stampede: Strategic share dumping and shareholder insurrections

Mukarram Attari, Suman Banerjee, Thomas H. Noe

Research output: Contribution to journalArticlepeer-review

11 Scopus citations

Abstract

In this paper, we develop a dynamic model of institutional share dumping surrounding control events. Institutional investors sometimes dump shares, despite trading losses, in order to manipulate share prices and trigger activism by "relationship" investors. These institutional investors are motivated to trade not only by trading profits but also by a desire to protect the value of their inventory and to disguise the quality of their own information. Relationship investor profit from targeting firms both by improving firm performance and by generating private information.

Original languageEnglish
Pages (from-to)181-222
Number of pages42
JournalJournal of Financial Economics
Volume79
Issue number1
DOIs
StatePublished - Jan 2006

Keywords

  • Corporate governance
  • Ownership structure
  • Strategic trading

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