Citation

Discussion Paper Details

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Title: Public Trading and Private Incentives

Author(s): Antoine Faure-Grimaud and Denis Gromb

Publication Date: July 2000

Keyword(s): Blockholder Incentives, Public Trading and Stock Price Information

Programme Area(s): Financial Economics

Abstract: This paper studies the link between public trading and the activity of a firm's large shareholder who can affect firm value. Public trading results in the formation of a stock price that is informative about the large shareholder's activity. This increases the latter's incentives to engage in value increasing activities. Indeed, if he has to liquidate part of his stake before the effect of his activity is publicly observed, a more informative price rewards him for his activity. Implications of this perspective are derived for the decision to go public and security design.

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Bibliographic Reference

Faure-Grimaud, A and Gromb, D. 2000. 'Public Trading and Private Incentives'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2505