Number of Shareholders and Stock Prices: Evidence from Japan

Merton (1987) proposes that an increase in a firm's investor base increases the firm's value. In Japan, companies can reduce their stock's minimum trading unit--the number of shares in a "round lot"--which facilitates trading in the stock by small investors. We find that a r...

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Bibliographic Details
Published in:The Journal of finance (New York) 1999-06, Vol.54 (3), p.1169-1184
Main Authors: Amihud, Yakov, Mendelson, Haim, Uno, Jun
Format: Article
Language:English
Subjects:
Arithmetic mean
Business structures
Correlation analysis
Financial securities
Investors
Liquidity
Power marketers
Securities trading
Shareholders
Shorter Papers
Stock exchanges
Stock prices
Stock shares
Stock splits
Stockholders
Studies
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Summary:Merton (1987) proposes that an increase in a firm's investor base increases the firm's value. In Japan, companies can reduce their stock's minimum trading unit--the number of shares in a "round lot"--which facilitates trading in the stock by small investors. We find that a reduction in the minimum trading unit greatly increases a firm's base of individual investors and its stock liquidity, and is associated with a significant increase in the stock price. Further, the stock price appreciation is positively related to an increase in the number of shareholders.
ISSN:0022-1082
1540-6261
DOI:10.1111/0022-1082.00141