The Impact of Corporate Governance and Earnings Management on Stock Market Liquidity in a Highly Concentrated Ownership Capital Market

2013 ◽  
Vol 28 (3) ◽  
pp. 292-316 ◽  
Author(s):  
Sasson Bar-Yosef ◽  
Annalisa Prencipe
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Earnings Management ◽  
Capital Market ◽  
Market Liquidity ◽  
Concentrated Ownership ◽  
Stock Market Liquidity ◽  
The Impact

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 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 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.

Corporate Governance and Stock Market Liquidity

2019 ◽  
Author(s):  
Erick Rading Outa ◽  
Nelson Maina Waweru ◽  
Peterson K Ozili
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Market Liquidity ◽  
Stock Market Liquidity

scholarly journals Foreign Ownership Effect to Stock Market Liquidity in Indonesia

MANAJERIAL ◽  
2021 ◽  
Vol 8 (01) ◽  
pp. 01
Author(s):  
Annisa Yasmin
Keyword(s):  
Stock Market ◽  
Financial Institutions ◽  
Capital Market ◽  
Foreign Ownership ◽  
Market Liquidity ◽  
Linear Effect ◽  
Non Linear Effect ◽  
Non Linear ◽  
Stock Market Liquidity ◽  
Research Period

Background – One of economic indicators of a country is the capital market. Liquid capital market can attract investors, both foreign and domestic investors, to invest their ownership in that country, which in turn can improve the country’s economic growth. Aim – This research aims to examine the influence foreign ownership on stock market liquidity in Indonesia. Design / methodology / approach – This research splits foreign ownership into two groups, the first one is foreign ownership by financial institutions, and the second one is foreign ownership by non-financial corporations. The type of data used is panel data using fixed effect model (FEM). The technique for examining the influence of foreign ownership on liquidity used multiple regression analysis. Findings – The result found that foreign ownership by financial institutions and non-financial corporations negatively affect liquidity.  The study also found a positively non-linear effect between foreign ownership by financial institutions to liquidity and a negatively non-linear effect between foreign ownership by non-financial institutions to liquidity. Research implication – This research can assist investors in determining investment in the Indonesian capital market by pay attention to variables such as foreign ownership, return, turnover, market capitalization and standard deviation. Limitation – The research period was short, which was only 21 months due to limited data and the research period that has passed too long, that is January 2012 to September 2013.

Corporate Governance and Liquidity

2010 ◽  
Vol 45 (2) ◽  
pp. 265-291 ◽  
Author(s):  
Kee H. Chung ◽  
John Elder ◽  
Jang-Chul Kim
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Alternative Model ◽  
Empirical Relation ◽  
Price Impact ◽  
Market Liquidity ◽  
Lower Probability ◽  
Market Quality ◽  
Stock Market Liquidity ◽  
Liquidity Measures

AbstractWe 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.

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