Kerry Back

Jones Graduate School of Business
Rice University
P.O. Box 2932
Houston, TX 77252-2932

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Rice University

NBER Working Papers and Publications

December 2016Activism, Strategic Trading, and Liquidity
with Pierre Collin-Dufresne, Vyacheslav Fos, Tao Li, Alexander Ljungqvist: w22893
We analyze dynamic trading by an activist investor who can expend costly effort to affect firm value. We obtain the equilibrium in closed form for a general activism technology, including both binary and continuous outcomes. Variation in parameters can produce either positive or negative relations between market liquidity and economic efficiency, depending on the activism technology and model parameters. Two results that contrast with the previous literature are that (a) the relation between market liquidity and economic efficiency is independent of the activist's initial stake for a broad set of activism technologies and (b) an increase in noise trading can reduce market liquidity, because it increases uncertainty about the activist's trades (the activist trades in the opposite direction ...

Published: Kerry Back & Pierre Collin‚ÄźDufresne & Vyacheslav Fos & Tao Li & Alexander Ljungqvist, 2018. "Activism, Strategic Trading, and Liquidity," Econometrica, Econometric Society, vol. 86(4), pages 1431-1463, July. citation courtesy of

November 2013Liquidity and Governance
with Tao Li, Alexander Ljungqvist: w19669
Is greater trading liquidity good or bad for corporate governance? We address this question both theoretically and empirically. We solve a model consisting of an optimal IPO followed by a dynamic Kyle market in which the large investor's private information concerns her own plans for taking an active role in governance. We show that an increase in the liquidity of the firm's stock increases the likelihood of the large investor 'taking the Wall Street walk.' Thus, higher liquidity is harmful for governance. Empirical tests using three distinct sources of exogenous variation in liquidity confirm the negative relation between liquidity and blockholder activism.

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