Number of Shareholders and Stock Prices: Evidence from Japan

  • Author(s): Yakov Amihud, Haim Mendelson, Jun Uno
  • Published: Dec 17, 2002
  • Pages: 1169-1184
  • DOI: 10.1111/0022-1082.00141

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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