Number of Shareholders and Stock Prices: Evidence from Japan

Authors

  • Yakov Amihud,

    1. Stern School of Business, New York University and at the Faculty of Management, Tel Aviv University
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  • Haim Mendelson,

    1. Graduate School of Business, Stanford University
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  • Jun Uno

    1. NIKKEI QUICK Information Technology Co. Ltd., Tokyo, Japan
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    • *

      Amihud is from the Stern School of Business, New York University and at the Faculty of Management, Tel Aviv University; Mendelson is from the Graduate School of Business, Stanford University; and Uno is from the NIKKEI QUICK Information Technology Co. Ltd., Tokyo, Japan. Helpful comments and suggestions by an anonymous referee and by the editor are gratefully acknowledged.


Abstract

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.

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