Abstract

http://ssrn.com/abstract=1142975
 
 

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Corporate Governance and Liquidity


Kee H. Chung


State University of New York at Buffalo - School of Management

John Elder


Colorado State University

Jang-Chul Kim


Northern Kentucky University - Haile/US Bank College of Business


Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

Abstract:     
We 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 different measures of liquidity.

Number of Pages in PDF File: 42

Keywords: Corporate governance, Spreads, Price impact, Information-based trading, Liquidity

JEL Classification: G10, G34

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Date posted: June 11, 2008 ; Last revised: May 31, 2009

Suggested Citation

Chung, Kee H. and Elder, John and Kim, Jang-Chul, Corporate Governance and Liquidity. Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1142975

Contact Information

Kee H. Chung (Contact Author)
State University of New York at Buffalo - School of Management ( email )
Buffalo, NY 14260
United States
716-645-3262 (Phone)
716-645-3823 (Fax)
HOME PAGE: http://mgt.buffalo.edu/home/faculty/academic/finance/faculty/keechung
John Elder
Colorado State University ( email )
Dept of Finance & Real Estate
1272 Campus Delivery
Fort Collins, CO 80523
United States
970-491-2952 (Phone)
HOME PAGE: http://lamar.colostate.edu/~jelder
Jang-Chul Kim
Northern Kentucky University - Haile/US Bank College of Business ( email )
Dept of Accounting, Finance, and Business Law
Highland Heights, KY 41099
United States
859-572-1486 (Phone)
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