| dc.description.abstract | In response to international trends, Taiwan Stock Exchange established the「Securities Borrowing and Lending System」in 2003, and then the securities dealers and securities institutions were subsumed into Taiwan Securities Borrowing and Lending Market in July of 2007. In the wake of these two measures, the size and influences of Securities Lending and Borrowing transactions have been expanded in Taiwan. Due to the fact that transaction cost and collateral restriction in securities lending and short selling are different, making the short sale transaction cost in the short days on securities lending transactions more favorable than that of short selling transaction. However, Taiwan’’s operation in securities lending market not only existed for merely a short while, but the current relevant literature is also only focused on the regulatory system.
This paper follows the methodology from D’’Avolio (2002), using company size, the proportion of institutional ownership, and the divergence of opinions of investors as variables. We utilized Taiwan’’s securities lending information from 2003 to 2009 to investigate which stocks tend to easily be lent and borrowed in lending transaction. In addition, we also do some empirical research on the supply side and demand side factors to examine which factors has impact on the loan fee rate.
On the supply side, we find that the larger size of the company and the more proportion of institutional investors holding lead to the more securities available for lending to reduce the borrower rates. On the other hand － on the demand side, the greater the divergence of opinion of investor, the higher market-to-book ratio and poor stock performance over the past would make the loan rate fee increased.
In addition, we also study the factors which will affect the probability of successful transactions in the securities lending, and do some empirical study from supply and demand side. The results show that when the larger size of the company and the greater proportion of institutional ownership, the supply of lending securities will be upgraded, and the probability of successful transactions will be increased. Moreover, when the greater divergence of opinion of investor and the worse performance of past stock price increase the borrower’s demand, the probability of successful transactions will also be increased.
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