Ownership concentration, short-sale constraints and limits to arbitrage in the Norwegian stock market

Abstract

This thesis examines whether high ownership concentration has an impact on shortsale constraints and therefore gives limits to arbitrage in the Norwegian Stock Market. With the use of methodology from Prado, Saffi, and Sturgess (2016), we investigate three different hypotheses: The first one is whether higher ownership concentration leads to higher short-sale constraints, the second is whether higher ownership concentration leads to larger negative abnormal returns following a positive demand shock in shorting, while the third hypothesis questions whether higher ownership concentration will create slower and milder reactions to negative earnings announcements. By investigating 69 firms from the Oslo Stock Exchange using data on ownership and equity lending, we are not able to find any results supporting our hypotheses. We are therefore not able to conclude that higher ownership concentration create short-sale constraints or limits to arbitrage in the Norwegian market.