The Pricing Discount for Limited Liquidity: Evidence from SWX Swiss Exchange and the Nasdaq

We investigate the pricing discount for limited liquidity. Unlike previous studies that have examined the relation between histroical returns and liquidity, ours looks directly at current stock prices. This approach requires less data and yields up-to-date information about limited liquidity discounts. We analyze data from the Swiss exchange and the Nasdaq during 1995-2001, and find a statistically and economically significant price-liquidity relation in both markets. We test the robustness of that relation with a procedure that does not rely on specific distributional assumptions. Our findings are unaffected. Accordingly, the discount suffered by the least liquid securities is about 30%.

Intergenerational Transfer of Family Firm Control: Discount Expectations of Potential Successors

Building on institutional theory and family sociology literature we explore the logics that underlie the formation of transaction price expectations related to the intergenerational transfer of corporate ownership in private family firms. By probing a sample of 3'487 students with family business background from 20 countries we show that next generation family members expect to receive a 56.58% discount in comparison to some nonfamily buyer (i.e. the family discount) when taking over the parent's firm. We also show that the logic underlying the formation of family discount expectations is characterized by parental altruism, filial reciprocity, filial decency and parental inducement. These norms embrace both the family and market logics and accommodate the duties and demands of children and parents in determining a fair transfer price. These findings are important for institutional theory as well as for family business and entrepreneurial exit literatures.

The price elasticity of demand for common stock

We study the price elasticity of demand for the common stock of an individual corporation. Despite the prevelance of assumptions that demand is perfectly elastic, there is little if any direct evidence in the literature to either support or reject that contention. Consistent with the notion of finite price elasticities, we find that the announcement of primary stock oferings by regulated firms depresses their stock prices and little if any evidence that this decline is the result of adverse information about future cash flows. Attempts to relate offer announcement effects directly to possible determinants of price elasticities, however, are inconclusive.