Work

Corporate Governance and Liquidity

Year: 2010

Type: article

Abstract: We investigate the empirical relation between corporate governance and stock market liquidity. We find that firms with better corporate governance have narrower spreads, higher market quality index, smaller price impact of trades, and lower probability of information-based trading. In addition, we show that changes in our liquidity measures are significantly related to changes in the governance index over time. These results suggest that firms may alleviate information-based trading and improve stock market liquidity by adopting corporate governance standards that mitigate informational asymmetries. Our results are remarkably robust to alternative model specifications, across exchanges, and to different measures of liquidity.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109010000104

Authors: Kee H. Chung, John Elder, Jang-Chul Kim

Institutions: State University of New York, University at Buffalo, State University of New York, Colorado State University, Northern Kentucky University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2024735205

FWCI: 56.28

Cites: 67

Cited by: 567

Related to: 10