Corporate Governance and Market Liquidity

Dumitrescu, Ariadna

doi:10.2139/ssrn.1343783

Cited by 12 publications

(8 citation statements)

References 44 publications

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“…In terms of operational transparency, better corporate governance can protect shareholders' interests and limit the activities that are not in line with the shareholders' best interests. Dumitrescu (2010) showed that corporate governance mechanisms affect the market liquidity of the firm's stock, as high monitoring costs, low ownership concentration, effective disclosure regulation and effective shareholder protection, lead to higher market liquidity. Leuz et al (2003) mentioned that corporate governance enhances financial transparency by mitigating the incentives and ability of managers to disclosure misleading information.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

Corporate governance strength and stock market liquidity in Malaysia

Al-Jaifi

Al-Rassas²,

Al-Qadasi

2017

IJMF

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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.

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Section: Hypotheses Developmentmentioning

confidence: 99%

Corporate governance strength and stock market liquidity in Malaysia

Al-Jaifi

Al-Rassas²,

Al-Qadasi

2017

IJMF

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“…Under such condition of poor protection, investors will not be interested to invest in that country. Furthermore, Dumitrescu (2010) highlights that governance would affect market liquidity by improving the effectiveness of shareholders' protection that leads to greater liquidity. Since rule of law emphasizes on improving the fair and foreseeable rule as well as achieving greater shareholders' protection, this study suggests that a greater rule of law will lead to greater market liquidity through an increase in the number of participants.…”

Section: Moderating Effect Of Rule Of Lawmentioning

confidence: 99%

Moderating Effects of Governance Quality on the Relationship between Stock Liquidity and Dividend in Emerging Market Countries

2019

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The paper examines the moderating effects of governance quality on stock liquidity and dividend relationship. Past empirical studies on the link between stock liquidity and dividend suggest there are mixed findings between them. A negative relationship suggests stock liquidity and dividend are a substitute which aligns with the liquidity hypothesis. On the other hand, a positive relationship between stock liquidity and dividend suggests stock liquidity informational effect increases a firm's incentive to pay dividends. Moderating factors could have contributed to such mixed findings. Therefore, this study suggested governance quality could be one of the moderating factors that contributed to the inconsistency findings. Governance quality has been known to mitigate information asymmetry that made firm pay more dividends by formulating and promoting sound policies. Thus, this study aimed to ascertain the moderating factors of governance quality on the relationship between stock liquidity and dividend. By using a sample from 22 emerging market countries, we adopted logistic panel random effect to estimate the model. Adopting the governance quality measurements developed by the World Bank, our empirical results found that political stability, government effectiveness, regulation quality and control of corruption are among the factors that moderated the relationship between stock liquidity and dividend.

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“…Furthermore, there is significant difference between presented definitions based on the country that it has been investigated [19]. Corporate governance is limited to relationship between a company and its shareholders [20]. This pattern is mentioned in the template of agency theory, while this conception may overstep relationship between company and its shareholders and defined in a network of relationship [21].…”

Section: Theoretical Underpinningsmentioning

confidence: 99%

“…Chesbrough recognize business model as crated value, identifying proportionate section of the market, defining structure of value chain, defining income generating mechanisms and corporation position in value chain and codification of competitive advantage that can be considered basis of open innovation [20].…”

Section: Theoretical Underpinningsmentioning

confidence: 99%

A Comprehensive Framework of Corporate Strategies Leveraging Open Innovation

Ziyae¹

2017

JSSM

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Today, corporate strategy entails a clearly defined, long-term idea that organizations set, looking for to create business value and stimulate the structures of corporations to implement the proper actions and to achieve customer satisfaction. In addition, corporate strategy is an incessant process that requires a continuous energy to involve investors in trusting the company with their money, thereby increasing the company's equity. One of the main corporate strategies in the service and public organizations is corporate governance which is considered as the mechanisms, processes and relations by which corporations are controlled and directed. Governance principles and strategies identify the distribution of responsibilities among regulators, managers, board of directors, shareholders, creditors, auditors, and other stakeholders. It includes the rules and procedures for making decisions in corporate affairs. Corporate governance includes the processes through which corporations' objectives are set and pursued in the context of the social, regulatory and market environment. Mechanisms of governance mostly involve canning and reviewing of decisions and policies of organizations, their partners, and affected customers and shareholders. This study has been done due to the lack of theoretical literature in this respect and the goal of this study is to design a model of corporate governance with open innovation approach in the insurance industry. The research method is qualitative and based on grounded theory. The sample consists of 8 faculty members and insurance industry experts who have been selected based on purposeful sampling procedure. This research, based on aim is an applied one and based on collecting data through interviews, it is considered as field research. According to research findings, open innovation at inbound, outbound and composition are defined as strategies that enhance corporate governance. Research findings recommended open innovation strategies of various ways to solve the problems of corporate governance should be used in the insurance industry.

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Corporate Governance and Market Liquidity

Cited by 12 publications

References 44 publications

Corporate governance strength and stock market liquidity in Malaysia

Corporate governance strength and stock market liquidity in Malaysia

Moderating Effects of Governance Quality on the Relationship between Stock Liquidity and Dividend in Emerging Market Countries

A Comprehensive Framework of Corporate Strategies Leveraging Open Innovation

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