Skema Research > skema-event > fairr research seminar rafael matta december 11

FAIRR research seminar Rafael Matta - Dec. 11

Rafael Matta (University of Amsterdam) will present a paper titled: "The rise of the equity lending market: implications for corporate financial policies" co-authored with Murillo Campello (Cornell University) and Pedro A. C. Saffi (University of Cambridge).


Ever increasing competition and search for yield have prompted institutional investors to lend their stock holdings, making them the largest suppliers of stocks used for shorting. We develop a model that examines the role of short sales constraints on corporate policies and use the equity lending market to show how shifts in the supply of lendable stocks affect corporate behaviour. Firms react to increases in lendable stocks by repurchasing shares and increasing investment. These reactions are more pronounced when firms have more liquid stocks, have higher growth opportunities, lower corporate governance standards, and when managers' compensation is more sensitive to stock prices.

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