Ownership structure, speculation, and shareholder intervention

Charles Kahn, Andrew Winton

Research output: Contribution to journalArticlepeer-review

288 Scopus citations

Abstract

An institution holding shares in a firm can use information about the firm both for trading ("speculation") and for deciding whether to intervene to improve firm performance. Intervention increases the value of the institution's existing shareholdings, but intervention only increases the institution's trading profits if it enhances the precision of the institution's information relative to that of uninformed traders. Thus, the ability to speculate can increase or decrease institutional intervention. We examine key factors that affect the intervention decision, the usefulness of "short-swing" provisions and restricted shares in encouraging institutional intervention, and implications for ownership structure across different firms.

Original languageEnglish (US)
Pages (from-to)99-129
Number of pages31
JournalJournal of Finance
Volume53
Issue number1
DOIs
StatePublished - Feb 1998

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