Ownership concentration, earnings management and stock market liquidity: evidence from Malaysia

2017 ◽  
Vol 17 (3) ◽  
pp. 490-510 ◽  
Author(s):  
Hamdan Amer Al-Jaifi
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Instrumental Variables ◽  
Generalized Method Of Moments ◽  
Market Liquidity ◽  
Ownership Concentration ◽  
Estimation Methods ◽  
Content Type ◽  
Stock Market Liquidity ◽  
The Impact

Purpose This paper aims to examine whether ownership concentration and earnings management affect the stock market liquidity of Malaysian firms. Design/methodology/approach This study uses a sample of 2,020 yearly firm observations in Bursa Malaysia over the period 2009-2012. The ordinary least square regression is used to examine the relationships. The study undertakes a sensitivity test by regressing the main study variables by using different measurements. Another robustness test is then used, where a regression based on the change in variables and a one-year lag of the independent variables are used. Furthermore, to alleviate the concern of possible endogeneity, the simultaneity and reverse causality are checked using the lag of the dependent variable, fixed effect regression, two-stage least squares using the instrumental variables and the generalized method of moments using instrumental variables analysis. Findings The study finds that firms with a high level of ownership concentration have discrepancies in information between informed and uninformed traders, which impair the stock market liquidity. In addition, this study finds that firms with high earnings management experience greater liquidity. A possible explanation for this is that firms might manage earnings to convey private information to enhance the information content of the earnings. Overall, the evidence suggests that manipulating earnings signals information informatively, particularly in a country with a higher level of ownership concentration and a higher likelihood of expropriating minority shareholders. Originality/value This study enriches the limited empirical research devoted to the impact of earnings management and ownership concentration on stock market liquidity especially in the context of emerging economies. The findings of this study are robust to alternative liquidity measurements, to alternative estimation methods, and to endogeneity bias.

scholarly journals Impact of ownership concentration, institutional ownership and earnings management on stock market liquidity

2020 ◽  
Vol 17 (2) ◽  
pp. 77-87 ◽  
Author(s):  
Ahmed Imran Hunjra ◽  
Uzma Perveen ◽  
Leon Li ◽  
Muhammad Irfan Chani ◽  
Rashid Mehmood
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Manufacturing Sector ◽  
Generalized Method Of Moments ◽  
Institutional Ownership ◽  
Vital Role ◽  
Market Liquidity ◽  
Ownership Concentration ◽  
Stock Market Liquidity ◽  
The Impact

Ownership structure plays a vital role in stock market liquidity. We analyze the impact of ownership concentration, institutional ownership and earnings management on stock market liquidity. We select 114 firms from manufacturing sector of Pakistan, India, Australia and Singapore. We extract data from DataStream from 2010 to 2018 of selected countries. We apply Generalized Method of Moments (GMM) to analyze the data. We find that ownership concentration, institutional ownership and earnings management significantly affect the stock market liquidity.

Corporate governance strength and stock market liquidity in Malaysia

2017 ◽  
Vol 13 (5) ◽  
pp. 592-610 ◽  
Author(s):  
Hamdan Amer Al-Jaifi ◽  
Ahmed Hussein Al-rassas ◽  
Adel Ali AL-Qadasi
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Internal Audit ◽  
Market Liquidity ◽  
Estimation Methods ◽  
Content Type ◽  
External Monitoring ◽  
Governance Effectiveness ◽  
Stock Market Liquidity ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of corporate governance strength on stock market liquidity in an emerging country, namely, Malaysia, by constructing a corporate governance score that captures both internal monitoring mechanisms (board of directors’ characteristics, audit committee’s characteristics and internal audit function) and external monitoring mechanism (audit quality). Design/methodology/approach The study uses a sample of 2,020 yearly firm observations in Bursa Malaysia over the period 2009-2012. The ordinary least square regression and several estimation methods such as two-stage least squares using instrumental variables (IV-2SLS) and dynamic GMM are employed. Findings This study finds a significant positive association between corporate governance effectiveness and stock market liquidity. The finding is robust to alternative liquidity measurements, to alternative estimation methods, and to endogeneity bias. Research limitations/implications This result implies that the firms with effective monitoring mechanisms mitigate information asymmetry which leads to less adverse selection problems among traders. Practical implications This study provides implications for regulators to help design regulations that enhance stock market liquidity. This study could also help investors and traders to formulate their trading decisions, and enables firms to know the importance of strengthening the corporate governance monitoring mechanisms. Originality/value This study constructs a corporate governance effectiveness measure by combining both internal and external monitoring mechanisms. These mechanisms have not been constructed together in one score in the corporate governance literature and the impact of internal audit function, as an internal monitoring mechanism on liquidity, has yet to be examined.

scholarly journals The Role of Ownership Structure and Board Characteristics in Stock Market Liquidity

2021 ◽  
Vol 9 (4) ◽  
pp. 74
Author(s):  
Wajih Abbassi ◽  
Ahmed Imran Hunjra ◽  
Suha Mahmoud Alawi ◽  
Rashid Mehmood
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Ownership Structure ◽  
Positive Impact ◽  
Generalized Method Of Moments ◽  
Fixed Effect Model ◽  
Market Liquidity ◽  
Board Characteristics ◽  
Stock Market Liquidity ◽  
The Impact

Corporate governance plays a significant role in the value of shareholders and share prices, hence stock market liquidity is affected. Previous research has mainly focused on the issue in developed markets, whereas in developing countries there is a need to analyze the influence of corporate governance on stock market liquidity. Therefore, the present study aims to examine the impact of ownership structure and board characteristics on stock market liquidity of non-financial firms of South Asian countries such as Pakistan, Sri Lanka, Bangladesh, and India. The data in the study is collected from the DataStream for the 2011–2020 period. The study uses a fixed effect model for the analysis of the data and hypotheses testing and generalized method of moments (GMM) is used to check the robustness of the results. The findings of the study indicate that institutional ownership, board size, board independence, and CEO duality have a significant and positive impact on stock market liquidity, whereas managerial ownership has a significant and negative effect on stock market liquidity.

scholarly journals Stock market liquidity, the great lockdown and the COVID-19 global pandemic nexus in MENA countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anas Alaoui Mdaghri ◽  
Abdessamad Raghibi ◽  
Cuong Nguyen Thanh ◽  
Lahsen Oubdi
Keyword(s):  
Stock Market ◽  
Negative Impact ◽  
Market Liquidity ◽  
Mena Region ◽  
Stock Market Returns ◽  
Content Type ◽  
Mena Countries ◽  
Global Pandemic ◽  
Stock Market Liquidity ◽  
The Impact

PurposeThe purpose of this paper is to investigate the impact of the global coronavirus (COVID-19) pandemic on stock market liquidity, while taking into account the depth and tightness dimensions.Design/methodology/approachThe author used a panel data regression on stock market dataset, representing 314 listed firms operating in six Middle East and North African (MENA) countries from February to May 2020.FindingsThe regression results on the overall sample indicate that the liquidity related to the depth measure was positively correlated with the growth in the confirmed number of cases and deaths and stringency index. Moreover, the market depth was positively related to the confirmed cases of COVID-19. The results also indicate that the liquidity of small cap and big cap firms was significantly impacted by the confirmed number of cases, while the stringency index is only significant for the liquidity depth measure. Moreover, the results regarding sectors and country level analysis confirmed that COVID-19 had a significant and negative impact of stock market liquidity.Research limitations/implicationsThis paper confirms that the global coronavirus pandemic has decreased the stock market liquidity in terms of both the depth and the tightness dimensions.Originality/valueWhile most empirical papers focused on the impact of the COVID-19 global pandemic on stock market returns, this paper investigated liquidity chock at firm level in the MENA region using both tightness and depth dimensions.

International stock market liquidity: a review

2016 ◽  
Vol 42 (2) ◽  
pp. 118-135 ◽  
Author(s):  
Rui Ma ◽  
Hamish D. Anderson ◽  
Ben R. Marshall
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Market Liquidity ◽  
Short Sales ◽  
Liquidity Premium ◽  
Content Type ◽  
International Stock Markets ◽  
Stock Market Liquidity ◽  
Dark Pools ◽  
The Impact

Purpose – The purpose of this paper is to review the literature on liquidity in international stock markets, highlights differences and similarities in empirical results across existing studies, and identifies areas requiring further research. Design/methodology/approach – International cross-country studies on stock market liquidity are categorized and reviewed. Important relevant single-country studies are also discussed. Findings – Market liquidity is influenced by exchange characteristics (e.g. the presence of market makers) and regulations (e.g. short-sales constraints). The literature has identified the most appropriate liquidity measures for global research, and for emerging and frontier markets, respectively. Major empirical facts are as follows. Liquidity co-varies within and across countries. Both the liquidity level and liquidity uncertainty are priced internationally. Liquidity is positively associated with firm transparency and share issuance, and negatively related to dividends paid out. The impact of internationalization on liquidity is not universal across firms and countries. Some suggested areas for future studies include: dark pools, high-frequency trading, commonality in liquidity premium, funding liquidity, liquidity and capital structure, and liquidity and transparency. Research limitations/implications – The paper focusses on international stock markets and does not consider liquidity in international bond or foreign exchange markets. Originality/value – This paper provides a comprehensive survey of empirical studies on liquidity in international developed and emerging stock markets.

Investor sentiment and liquidity in emerging stock markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dorra Messaoud ◽  
Anis Ben Amar ◽  
Younes Boujelbene
Keyword(s):  
Stock Market ◽  
Generalized Method Of Moments ◽  
Investor Sentiment ◽  
Market Liquidity ◽  
Subprime Crisis ◽  
Sample Period ◽  
Noise Traders ◽  
Content Type ◽  
Market Makers ◽  
Stock Market Liquidity

PurposeBehavioral finance and market microstructure studies suggest that the investor sentiment and liquidity are related. This paper aims to examine the aggregate sentiment–liquidity relationship in emerging markets (EMs) for both the sample period and crisis period. Then, it verifies this relationship, using the asymmetric sentiment.Design/methodology/approachThis study uses a sample consisting of stocks listed on the SSE Shanghai composite index (348 stocks), the JKSE (118 stocks), the IPC (14 stocks), the RTS (12 stocks), the WSE (106 stocks) and FTSE/JSE Africa (76 stocks). This is for the period ranging from February, 2002 until March, 2021 (230 monthly observations). We use the panel data and apply generalized method-of-moments (GMM) of dynamic panel estimators.FindingsThe empirical analysis shows the following results: first, it demonstrates a significant relationship between the aggregate investor sentiment and the stock market liquidity for the sample period and crisis one. Second, referring to the asymmetric sentiment, we have empirically given proof that the market is significantly more liquid in times of the optimistic sentiment than it is in times of the pessimistic sentiment. Third, using panel causality tests, we document a unidirectional causality between the investor sentiment and liquidity in a direct manner through the noise traders and the irrational market makers and also a bidirectional causality in an indirect channel.Practical implicationsThe results reported in this paper have implications for regulators and investors in EMs. Firstly, the study informs the regulators that the increases and decreases in the stock market liquidity are related to the investor sentiment, not financial shocks. We empirically evince that the traded value is higher in the crisis. Secondly, we inform insider traders and rational market makers that the persistence of increases in the trading activity in both quiet and turbulent times is associated with investor participants such as noise traders and irrational market makers.Originality/valueThe originality of this work lies in employing the asymmetric sentiment (optimistic/pessimistic) in order to denote the sentiment–liquidity relationship in EMs for the sample period and the 2007–2008 subprime crisis.

scholarly journals The influence of firm, industry and concentrated ownership on dynamic capital structure decision in emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Razali Haron ◽  
Naji Mansour Nomran ◽  
Anwar Hasan Abdullah Othman ◽  
Maizaitulaidawati Md Husin ◽  
Ashurov Sharofiddin
Keyword(s):  
Capital Structure ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Dynamic Environment ◽  
Order Theory ◽  
Ownership Concentration ◽  
Content Type ◽  
Dynamic Panel Model ◽  
The Impact ◽  
Dynamic Capital Structure

Purpose This study aims to evaluate the impact of firm, industry level determinants and ownership concentration on the dynamic capital structure decision in Indonesia and analyses the governing theories. Design/methodology/approach This study uses the dynamic panel model of generalized method of moments-System (one-step and two-step) by using a panel data from 2000 to 2014 to examine the relationship between the determinants and leverage. The results are robust to the various definitions of leverage, heterogeneity, autocorrelation, multicollinearity and endogeneity concern. Findings Growing firms and firms operating in a highly concentrated industry use high level of debt, taking advantage of the tax shield (trade-off theory). However, if the firms are operating in a highly dynamic environment, they take on less debt as to avoid bankruptcy risk. Firms in Indonesia opt for debt financing perhaps to act as a controlling mechanism to mitigate agency conflicts that may exist between the large controlling shareholders and the minority. Aged and highly profitable firms with high tangible and intangible assets and liquidity level operating in a high dynamic environment follow the pecking order theory. Research limitations/implications This study does not perform each industry regression individually. All the industries are pooled together, as the main focus of this study is to examine the factors affecting leverage of firms in general without giving particular attention to individual industry. Originality/value The insights on the impact of ownership concentration and industry characteristics are novel especially on Indonesia, thus fill the gap in the literature.

Does gender diversity on boards reduce information asymmetry problems? Empirical evidence from the French market

2019 ◽  
Vol 10 (2) ◽  
pp. 144-166
Author(s):  
Nadia Loukil ◽  
Ouidad Yousfi ◽  
Raissa Wend-kuuni Yerbanga
Keyword(s):  
Asymmetric Information ◽  
Stock Market ◽  
Gender Diversity ◽  
Market Liquidity ◽  
Idiosyncratic Volatility ◽  
Independent Directors ◽  
Corporate Boards ◽  
Content Type ◽  
Bid Ask Spread ◽  
The Impact

Purpose The purpose of this paper is to investigate the effect of female members in boards of directors on asymmetric information in the French stock market. Design/methodology/approach The authors use two proxies for asymmetric information: the idiosyncratic volatility and the bid-ask spread. This study is conducted on all listed firms in the SBF 120 index between 2002 and 2012. Findings Results show that gender diversity in boardrooms has a negative effect on the level of private information in stock markets and reduces the bid-ask spread. However, these effects are significant in family-controlled firms: female inside directors significantly increase the idiosyncratic volatility and the bid-ask spread, while female independent directors decrease both proxies for stock market liquidity. Research limitations/implications Our empirical findings contribute to the current debate on the benefits of gender diversity on corporate boards from the market perspective. It shows that, under specific conditions, financial markets could be receptive to the presence of female directors in boardrooms. Practical implications Practitioners and policymakers advocate the benefits of gender diversity on corporate boards. This paper shows that when the protection of minority shareholders is poor, the stock market is receptive to the presence of women independent directors, only in family controlled firms. This is a further argument that could help women to overcome glass-ceiling barriers they usually face to achieve top management positions. Originality/value This paper provides support for the increased attention paid to gender-diverse boards. It addresses the market sensitivity toward the presence of women members in French boardrooms and their positions. This is the first paper, to the best of our knowledge, to address how appointing women to different positions in the boardroom could provide signals to investors in the presence of asymmetric information. French firms are mostly family controlled. Thus, the findings bring valuable information of the impact of board diversity on the stock market considering family and nonfamily firms.

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