Finance Seminar: Pedro Saffi, University of Cambridge

Title: The Rise of the Equity Lending Market: Implications for Corporate Financial Policies

2017.06.21 | Bodil Westermann Krog

Date Thu 26 Oct
Time 14:15 15:15
Location Fuglesangs Allé 4, 8210 Aarhus V, building 2630(K), room 101

Presenter: Pedro Saffi, University of Cambridge

Title: The Rise of the Equity Lending Market: Implications for Corporate Financial Policies (with Murillo Campello)

Abstract: Ever increasing competition and search for yield have prompted institutional investors to lend their equity holdings, making them the largest suppliers of stocks used for shorting. We use the evolving framework of institutional investing to show how shifts in the supply of lendable stocks impact corporate policies. Firms react to increases in lendable stocks by repurchasing shares and building up cash reserves. To fund those responses, they pay fewer dividends, issue debt, and cut investment. Firm reactions are more pronounced when stocks are ex-ante more liquid, relatively overvalued, have higher pent-up shorting demand, and when managers' compensation is more sensitive to stock prices.

Area of Research: Empirical Finance

Organizers: Paolo Santucci de Magistris and Agatha Murgoci

Finance and Accounting Seminar Series