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

Abbassi, Wajih; Hunjra, Ahmed Imran; Alawi, Suha Mahmoud; Mehmood, Rashid

doi:10.3390/ijfs9040074

Cited by 11 publications

(10 citation statements)

References 71 publications

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“…This indicates that the higher the board size, the higher the stock market liquidity. This is consistent with the findings of Daadaa (2021) and Abbassi et al (2021), and is also in line with the debate that larger boards have more resources to monitor managerial performance and have skills to form various effective committees, allocate specific tasks, and facilitate greater debating on corporate issues. This can lead to greater information transparency (Anderson et al, 2004;Klein, 2002).…”

Section: Board Structure and Stock Market Liquiditysupporting

confidence: 88%

“…That is, board size is positively correlated with stock liquidity. Abbassi et al (2021) also indicated that board size has a positive effect on stock liquidity. Based on the arguments above, the following hypothesis is developed: H1: Board size improves stock liquidity.…”

Section: Board Size and Stock Market Liquiditymentioning

confidence: 98%

“…The author suggested that firms with good corporate governance improve their stock market liquidity as it is associated with higher information disclosure. Furthermore, Abbassi, Hunjra, Alawi, and Mehmood (2021) examined the impact of board composition on the stock market liquidity in South Asian countries, such as India, Bangladesh, Sri Lanka and Pakistan, from 2011 and 2020. They showed that board size, chief executive officer (CEO) duality and board independence have a positive and significant impact on stock liquidity.…”

Section: Review Of Board Structure and Stock Market Liquidity Studiesmentioning

confidence: 99%

“…In addition, they indicated that improvements in the board's independence over time are positively related to improvements in the firm's stock liquidity. Moreover, Abbassi et al (2021) indicated that board independence has a positive impact on stock liquidity.…”

Section: Board Independence and Stock Market Liquiditymentioning

confidence: 99%

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Board Structure and Stock Market Liquidity: Evidence from Saudi's Banking Industry

Almulhim¹

2022

5002

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This paper aims to explore the impact of corporate governance on banks’ stock market liquidity. Specifically, we examine the influence of one of the most important corporate governance mechanisms, board structure, on the stock market liquidity of listed banks in Saudi Arabia. We mainly concentrate on four characteristics of board structure: board size, board independence, board meetings and board busyness, and their impact on bid–ask spread, trading volume, turnover ratio and number of trades (employed as proxies of stock liquidity). This study employs a pooled ordinary least squares (OLS) model to investigate this relationship. Furthermore, we use a lag approach and the generalized method of moments (GMM) estimation to test for endogeneity issues. The findings of the two models are the same as the main estimation model of the OLS. Using a sample of 108 observations representing all banks listed on the Saudi Stock Market (TASI) from 2010 to 2020, we find a positive and significant association between board size and board independence with stock liquidity. However, board busyness is negatively associated with stock liquidity. Furthermore, we examine the relationship between board structure and agency problems. The results show that board size and board independence reduce agency problems, whereas board busyness increases agency problems. The findings of this paper provide implications for Saudi regulators, banks’ board of directors and banks’ shareholders.

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Section: Board Structure and Stock Market Liquiditysupporting

confidence: 88%

Section: Board Size and Stock Market Liquiditymentioning

confidence: 98%

Section: Review Of Board Structure and Stock Market Liquidity Studiesmentioning

confidence: 99%

Section: Board Independence and Stock Market Liquiditymentioning

confidence: 99%

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Board Structure and Stock Market Liquidity: Evidence from Saudi's Banking Industry

Almulhim¹

2022

5002

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“…Gul et al (2011) also state that female directors expect higher monitoring levels, in the form of auditing, than their male colleagues. (Abbassi et al, 2021) conducted Research stated that the large board of directors enhances stock liquidity because board members play vital monitoring role to reduce information asymmetry and eventually helping to enhance stock liquidity. Mbanyele (2021) argued that board networks enhances stock liquidity more via the information channel when economic policy uncertainty is high.…”

Section: Board Characteristics and Stock Liquiditymentioning

confidence: 99%

Does financial transparency substitute corporate governance to improve stock liquidity? Evidence from emerging market of Pakistan

et al. 2022

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The aim of this study is to empirically analyze the impact of corporate governance on stock liquidity and the moderating role of financial transparency, through the lens of information asymmetry and agency theory. The sample consists of non-financial firms listed on the Pakistan stock exchange during the 2009–2019 period. The study used an instrumental variable approach and new corporate governance index, developed with principal component analysis, to demonstrate a relationship between corporate governance and stock liquidity. The results show a significant, positive relationship between the corporate governance index and stock liquidity, suggesting that well governed firms have high liquidity. To the best of our knowledge, this is the first finance study to investigate the moderating impact of financial transparency on the relation between corporate governance and stock liquidity. The results show that financial transparency, as measured by multiple proxies, has a negative moderating impact on the relationship between corporate governance and stock liquidity, suggesting that corporate governance in Pakistan is weak. Together, the results suggest that Pakistani firms use financial transparency as a substitute for corporate governance to improve stock liquidity. The results are robust to a series of endogeneity checks using alternative proxies of stock liquidity.

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Tech for stronger financial market performance: the impact of AI on stock price crash risk in emerging market

Li,

Younas,

Maqsood

et al. 2024

IJOEM

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PurposeThe increasing awareness and adoption of technology, particularly artificial intelligence (AI), reshapes industries and daily life, fostering a proactive approach to risk management and leveraging advanced analytics, which may affect the stock price crash risk (SPCR). The main objective of the current study is to explore how AI adoption influences SPCR.Design/methodology/approachThis study employs an Ordinary Least Squares (OLS) fixed-effect regression model to explore the impact of AI on SPCR in Chinese A-share listed companies from 2010 to 2020. Further, number of robustness analysis (2SLS, PSM and Sys-GMM) and channel analysis are used to validate the findings.FindingsThe primary findings emphasize that AI adoption significantly reduces SPCR likelihood. Further, channel analysis indicates that AI adoption enhances internal control quality, contributing to a reduction in firm SPCR. Additionally, the observed relationship is notably more pronounced in non-state-owned enterprises (non-SOEs) compared to state-owned enterprises (SOEs). Similarly, this distinction is heightened in nonforeign enterprises (non-FEs) as opposed to foreign enterprises (FEs). The study finding also supports the notion that financial analysts enhance transparency, reducing the SPCR. Moreover, the study results consistently align across different statistical methodologies, including 2SLS, PSM and Sys-GMM, employed to effectively address endogeneity concerns.Research limitations/implicationsOur study stands out for its distinctive focus on the financial implications of AI adoption, particularly how it influences firm-level SPCR, an area that has been overlooked in previous research. Through the lens of information asymmetry theory, agency theory, and the economic implications of integrating AI into financial markets, our study makes a substantial contribution in mitigating SPCR.Originality/valueThis study underscores the pivotal role of AI adoption in influencing stock markets for enterprises in China. Embracing digital strategies, fostering transparency and prioritizing talent development are key for reaping substantial benefits. The study recommends regulatory bodies and service providers to promote AI adoption in strengthening financial supervision and ensure market stability, emphasizing the importance of investing in technologies and advancing talent development.

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

Cited by 11 publications

References 71 publications

Board Structure and Stock Market Liquidity: Evidence from Saudi's Banking Industry

Board Structure and Stock Market Liquidity: Evidence from Saudi's Banking Industry

Does financial transparency substitute corporate governance to improve stock liquidity? Evidence from emerging market of Pakistan

Tech for stronger financial market performance: the impact of AI on stock price crash risk in emerging market

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