An Investigation Of The Relation Between Corporate Governance And Liquidity: Empirical Evidence From France

Karmani, Majdi; Ajina, Aymen; Boussaada, Rym

doi:10.19030/jabr.v31i2.9118

Cited by 15 publications

(17 citation statements)

References 68 publications

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“…It also has advantages as it captures the transaction costs related to trading and it considers the bidask spread in the sense that part of the reason for the return being measured in response to trading is the price movement to the bid or ask. Following previous studies such as the works of Ajina et al (2015), Amihud et al (2015), Choi et al (2014), Wang (2013), Kang and Zhang (2014), the measure is normalized by taking the natural logs to alleviate the impact of any extreme value. The following equation shows the estimation method of Amihud's measure:…”

Section: Methodsmentioning

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: Methodsmentioning

confidence: 99%

Corporate governance strength and stock market liquidity in Malaysia

Al-Jaifi

Al-Rassas²,

Al-Qadasi

2017

IJMF

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“…The results are robust whether performance is measured by price-book value ratio or stock returns. The reason for the same seems to be that the women directors’ appointment is picked up by the investors as a positive signal who otherwise have asymmetric information about the firms (Ajina & Lakhal, 2010; Karmani et al, 2015). They believe the corporate governance mechanism in fine fettle and visualise the appointment as an indicator towards the future success of the company (Friedman & Singh, 1989), besides adhering to the laid down norms.…”

Section: Discussionmentioning

confidence: 99%

Do Women Directors Impact Financial Outcomes? The Indian Evidence

Kumar

Nigam

Singh

2020

Indian Journal of Corporate Governance

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This article investigates the impact of women directors on financial outcomes—return and risk of Indian companies. It applies fixed and random effects Tobit regressions to examine the effect of female directors on financial outcomes (returns and risk) of the firm, controlling promoters’ shareholding, leverage, firm growth and age, board size and board meetings. The study does not find any support to agency and resource dependence theories because the proportion of women directors in most Indian boards is too small to make much impact. However, it has a moderating influence to reduce variations in accounting profits and stock returns. The investors reward also meeting the regulatory quota of woman member on the boards by higher market returns indicating a signalling effect. The study adds an understanding of quota induced women directors’ influence on the firm’s financial outcomes. However, the regulators should be cautious in mandating induction of women members on the boards as they might be inexperienced or lack the needed grounding to effectively influence board processes.

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“…Governance is well noted for its effect on mitigating information asymmetry in a number of empirical studies (Kanagaretnam et al 2007;Cormier et al 2010;Elbadry et al 2015). In addition, past studies have documented there is a positive association between governance effectiveness and market liquidity (Amer Al-Jaifi et al 2017; Ali et al 2016;Karmani, Ajina & Boussaada 2015;Chung, Elder & Kim 2010). Good governance quality is very important in order to increase investors' confidence, including broadening and deepening its capital market (Amer Al-Jaifi et al 2017).…”

Section: Literature Reviewmentioning

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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An Investigation Of The Relation Between Corporate Governance And Liquidity: Empirical Evidence From France

Abstract: ABSTRACT

Cited by 15 publications

References 68 publications

Corporate governance strength and stock market liquidity in Malaysia

Corporate governance strength and stock market liquidity in Malaysia

Do Women Directors Impact Financial Outcomes? The Indian Evidence

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

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