Paying for Market Quality

2009 ◽  
Vol 44 (6) ◽  
pp. 1427-1457 ◽  
Author(s):  
Amber Anand ◽  
Carsten Tanggaard ◽  
Daniel G. Weaver
Keyword(s):  
Financial Markets ◽  
Information Asymmetry ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Market Quality ◽  
Trading Activity ◽  
Limit Order ◽  
Limit Order Markets ◽  
Listed Firms ◽  
Liquidity Provision

AbstractMany financial markets, including electronic limit order markets, assign designated liquidity providers (LPs). We study the experience of the Stockholm Stock Exchange, where listed firms contract directly with LPs. Our analysis offers insights regarding situations where designated liquidity provision may be beneficial. In addition, we consider the form of liquidity provision contracts, including affirmative obligations required of the LP and compensation for LP services. We find that low current trading activity, wide spreads, and higher information asymmetry increase the attractiveness of contracted liquidity provision. The evidence indicates that LPs trade against market movements and in times of wide spreads. On balance, firms contracting with LPs experience a decreased cost of capital and significant improvements in market quality and price discovery.

The effect of auditor narcissism on audit market competition

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hojat Mohammadi ◽  
Mahdi Salehi ◽  
Meysam Arabzadeh ◽  
Hassan Ghodrati
Keyword(s):  
Financial Markets ◽  
Significant Relationship ◽  
Design Methodology ◽  
Audit Quality ◽  
Stock Exchange ◽  
Market Competition ◽  
Competitive Pressure ◽  
Content Type ◽  
Listed Firms ◽  
Audit Market

Purpose This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure). Design/methodology/approach This paper’s method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2018 using a sample of 188 firms (1,310 observations). The method used for hypothesis testing is linear regression using panel data. Findings The results show a negative and significant relationship between auditor narcissism and audit market competition and its indices, including auditor concentration, clients’ concentration and competitive pressure. Moreover, a positive and significant relationship was observed between audit quality and audit market competition and its indices, including auditor concentration, client concentration and competitive pressure. Originality/value To analyzes competition indices in the audit market (auditor concentration, clients’ concentration and competitive pressure). The variable is assessed once more using the exploratory factor analysis of the so-called three variables single variable, named audit market competition. So the central question of the study is investigated within a broader sense. Moreover, as the present study is carried out in the emergent financial markets with extremely competitive audit markets to figure out the effect of auditors’ intrinsic characteristics on such markets’ competitiveness, it can provide useful information in this field.

scholarly journals The Relationship between Non-financial Reporting, Environmental Strategies and Financial Performance. Empirical Evidence from Milano Stock Exchange

2018 ◽  
Vol 8 (4) ◽  
pp. 76 ◽  
Author(s):  
Simone Pizzi
Keyword(s):  
Financial Markets ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Rapid Development ◽  
Financial Economic ◽  
Socially Responsible ◽  
Responsible Investment ◽  
Listed Firms ◽  
Information Tools ◽  
The Relationship

The CSR theme has taken on an increasingly central role within financial markets. In fact, the last decade has been characterized by a rapid development of “socially responsible” investment, conventionally known as SRI. In this sense, an increasing number of listed firms have reported their non-financial information to the purpose to favor the interaction with their stakeholders. The relevance of these information tools stems from the need to protect investors against companies operating through greenwashing mechanisms. The aim of this research is to assess the effect of CSR on financial economic performance. As already happened within similar studies concerning economic entities different from Italy, the study assesses how the ability to generate income, and, thus, to distribute value towards the shareholder, are influenced by the orientation of companies in the field of sustainability accounting and the aptitude to check the environmental risk associated with the exercise of business activity.

scholarly journals Measuring Information Asymmetry in Large Active Firms on the Tehran Stock Exchange

2016 ◽  
Vol 63 (3) ◽  
pp. 333-346
Author(s):  
Mostafa Shamsoddini ◽  
Mohammad N. Shahiki Tash ◽  
Farhad Khodadad-Kashi
Keyword(s):  
Firm Performance ◽  
Financial Markets ◽  
Information Asymmetry ◽  
Stock Markets ◽  
Stock Exchange ◽  
Composite Index ◽  
Financial Information ◽  
Investment Strategies ◽  
Information Measuring ◽  
Informational Environment

In financial markets, transparency of financial information is one of the most effective variables of investment strategies. Information asymmetry can seriously affect firm performance on the stock exchange and firms with a poor informational environment can lose the interest of investors. Reducing information asymmetry can have an important effect on firm performance on the stock exchange. Firms may lack a clear informational environment in the market because of the emerging conditions governing the Tehran Stock Exchange. Because larger and more active firms on the Tehran Stock Exchange provide more information, measuring the informational environment of these firms provides an overview of information asymmetry. The present study calculated the information asymmetry in these firms using the PIN and FE indices. The inconsistent results provided by these indices prompted the authors to offer a new index that is a composite of the PIN and FE that can better explain information asymmetry in developing market such as Asian stock markets. The results show that the new composite index, by using the mechanisms of the PIN and FE indices, provides a better outcome. The new composite index shows that the Tosee Melli Inv (TMEL1), Mobarakeh Steel (FOLD1), Iran Mobil Tele (HMRZ1), Saipa (SIPA1) and I.N.C. Ind. (MSMI1) firms have a better informational environment on the Tehran Stock Exchange.

scholarly journals Does Demutualization Spur Liquidity?

2020 ◽  
Vol 3 (1) ◽  
pp. 15-26
Author(s):  
Farman Ali ◽  
Man Wang ◽  
Imran Ali ◽  
Syed Tauseef ALi
Keyword(s):  
Social Welfare ◽  
Transaction Cost ◽  
Stock Exchange ◽  
Three Dimensions ◽  
Empirical Literature ◽  
Trading Activity ◽  
Listed Firms ◽  
Market Depth ◽  
Prior Literature ◽  
The Impact

Purpose: The literature on demutualization is confined to efficiency and social welfare issues. Little empirical literature exists on the effect of demutualization on listed firms. This study examines the impact of demutualization on the liquidity of listed firms’ stocks. Methodology: It empirically investigates how the liquidity of listed firms’ stocks is affected by demutualization. Analyzing data of 137 non-financial firms listed on the Pakistan Stock Exchange for 2005 to 2017, we employ fixed effect regression to test the hypotheses. Findings: We find that demutualization has significantly improved liquidity. We analyze all three dimensions of liquidity that are the trading activity, market impact, and transaction cost. We find that demutualization increases trading activity, improve market depth, and has reduced the transaction cost.  Implications: Our findings suggest that demutualization is beneficial not only for listed firms but also for its shareholders as all three dimensions of liquidity are improved by demutualization. Stock exchanges that are not demutualized and are facing liquidity problem, can be improved by changing its structure from mutual to demutualized. Originality: Prior literature focuses on the impact of demutualization on the stock market or social welfare. There is scares research on the effect of demutualization of the listed firm. This study fills this gap by analyzing the impact of demutualization on listed firms' liquidity in a developing economy, such as Pakistan.

Do Algorithmic Traders Improve Liquidity When Information Asymmetry is High?

2020 ◽  
pp. 2050015
Author(s):  
Archana Jain ◽  
Chinmay Jain ◽  
Revansiddha Basavaraj Khanapure
Keyword(s):  
Financial Markets ◽  
Information Asymmetry ◽  
Natural Experiment ◽  
Equity Markets ◽  
Algorithmic Trading ◽  
Unanswered Question ◽  
Earnings Announcement ◽  
Liquidity Provision ◽  
High Information

Hendershott et al. (2011, Does Algorithmic Trading Improve Liquidity? Journal of Finance 66, 1–33) show that algorithmic traders improve liquidity in equity markets. An equally important and unanswered question is whether they improve liquidity when information asymmetry is high. We use days surrounding earnings announcement as a period of high information asymmetry. First, we follow Hendershott et al. (2011, Does Algorithmic Trading Improve Liquidity? Journal of Finance 66, 1–33) to use introduction of NYSE autoquote as a natural experiment. We find that increased algorithmic trading (AT) as a result of NYSE autoquote does not improve liquidity around earnings announcements. Next, we use trade-to-order volume % and cancel rate as a proxy for algorithmic trading and find that abnormal spreads surrounding the days of earnings announcement are significantly higher for stocks with higher AT. Our findings indicate that algorithmic traders reduces their role of liquidity provision in markets when information asymmetry is high. These findings shed further light on the role of liquidity provision by algorithmic traders in the financial markets.

The effects of audit quality on the costs of capital of firms in Ghana

2018 ◽  
Vol 16 (4) ◽  
pp. 639-659 ◽  
Author(s):  
William Coffie ◽  
Ibrahim Bedi ◽  
Mohammed Amidu
Keyword(s):  
Audit Quality ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Low Cost ◽  
Cost Of Debt ◽  
Future Research ◽  
Content Type ◽  
Listed Firms ◽  
Financial Firms ◽  
The Cost

PurposeThis paper aims to investigate the effects of audit quality on the cost of capital in Ghana.Design/methodology/approachNon-financial firms listed on the Ghana Stock Exchange (GSE) as well as non-listed firms from the database of Ghana Club 100 were included in the sample. Series are yearly, covering a sample of 40 firms during the six-year period, 2008-2013. The study employed the positivist research paradigm to establish the relationship between audit quality and the cost of capital.FindingsThere is evidence to suggest that the cost of debt and the overall cost of capital of firms in Ghana can be explained by the quality of the external auditors. The results also show that the large size of the board is associated with low cost of debt.Research limitations/implicationsThe fact that the choice of quality measure is based on firm size only and other measurements of audit quality could not be measured. Future research may examine how other approaches to measuring audit quality affect cost of capital.Practical implicationsThe results significant for those charged with assurance and regulation, as well as lenders and managers of companies.Originality/valueThe authors investigate how external auditing quality affects the cost of capital of firms operating in Ghana.

The Value of the Designated Market Maker

2007 ◽  
Vol 42 (3) ◽  
pp. 735-758 ◽  
Author(s):  
Kumar Venkataraman ◽  
Andrew C. Waisburd
Keyword(s):  
Market Quality ◽  
Market Maker ◽  
Cumulative Abnormal Return ◽  
Limit Order ◽  
Market Structures ◽  
Liquidity Provision ◽  
Potential Benefits ◽  
Order Books ◽  
Limit Order Books ◽  
Paris Bourse

AbstractThe proliferation of electronic limit order books operating without dealers raises questions regarding the need for intermediaries with affirmative obligations to maintain markets. We develop a simple model of dealer participation and test it using a sample of less liquid firms that trade on the Paris Bourse. The results indicate that firms with designated dealers exhibit better market quality, and that younger firms, smaller firms, and less volatile firms choose a designated dealer. Around the announcement of dealer introduction, stocks experience an average cumulative abnormal return of nearly 5% that is positively correlated with improvements in liquidity. Overall, these findings emphasize the potential benefits of designing better market structures, even within electronic limit order books, and suggest that purely endogenous liquidity provision may not be optimal for all securities.

Banning Cassandra from the Market? An Empirical Analysis of Short-Selling Bans during the Covid-19 Crisis

2020 ◽  
Vol 17 (3-4) ◽  
pp. 386-418 ◽  
Author(s):  
Gianfranco Siciliano ◽  
Marco Ventoruzzo
Keyword(s):  
Financial Markets ◽  
Information Asymmetry ◽  
Stock Markets ◽  
Abnormal Returns ◽  
Equity Market ◽  
Short Selling ◽  
Market Quality ◽  
Policy Goals ◽  
The World ◽  
European Stock Markets

During the recent COVID-19 pandemic crisis, stock markets around the world have witnessed an abrupt decline in security prices and an unprecedented increase in security volatility. In response to a week of financial turmoil on the main European stock markets, some market regulators in Europe, including France, Austria, Italy, Spain, Greece, and Belgium, passed temporary short-selling bans in an attempt to stop downward speculative pressures on the equity market and stabilize and maintain investors’ confidence. This paper examines the effects of these short-selling bans on market quality during the recent pandemic caused by the spread of COVID-19. Our results suggest that during the crisis, banned stocks had higher information asymmetry, lower liquidity, and lower abnormal returns compared with non-banned stocks. These findings confirm prior theoretical arguments and empirical evidence in other settings that short-selling bans are not effective in stabilizing financial markets during periods of heightened uncertainty. In contrast, they appear to undermine the policy goals market regulators intended to promote.

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