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Trading Restrictions and Stock Prices

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Author Info
Robin Greenwood
Abstract

I examine a series of stock splits in Japan in which firms restrict the ability of their investors to sell their shares for a period of approximately 2 months. By removing potential sellers from the market, the restrictions have the effect of increasing the impact of trading on prices. The greater the desire of investors to trade, and the greater the restrictions, the larger the impact of the restrictions. In the data, particularly severe restrictions are associated with returns of over 30% around the ex-date, most of which are reversed when investors are allowed to sell again. Firms are more likely to issue equity or redeem convertible debt during the restricted period, suggesting strong incentives for manipulation. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/rfs/hhn022
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Article provided by Oxford University Press for Society for Financial Studies in its journal The Review of Financial Studies.

Volume (Year): 22 (2009)
Issue (Month): 2 (February)
Pages: 509-539
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Handle: RePEc:oup:rfinst:v:22:y:2009:i:2:p:509-539

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  1. Hirshleifer, David & Teoh, Siew Hong & Yu, Jeff Jiewei, 2009. "Short Arbitrage, Return Asymmetry And The Accrual Anomaly," MPRA Paper 16487, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-10-23.

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