Prof. Sanjay Banerji is a Professor of Finance at University of Nottingham Business School, Jubilee Campus Nottingham, NG8 1BB, United Kingdom. Detailed profile can be found here.
University of Nottingham Business School, Jubilee Campus Nottingham, NG8 1BB, United Kingdom
The paper explores the impact of illiquidity factor due to search problems in the thinner secondary market and investigates the ‘’liquidity premium’ that the longer gestation projects will pay to attract investors. We derive an index of illiquidity premium linking to search costs, asymmetric information and relative scarcity in buyers and sellers. Finally, we link out results to the excess returns that investors demand for the premium which has a first order impact on investments, especially for new ventures, R and D and similar type of firms.
