Abstract

http://ssrn.com/abstract=1929116
 
 

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Powerful Subordinates: Internal Governance and Stock Market Liquidity


Pawan Jain


Central Michigan University

Christine X. Jiang


University of Memphis - Fogelman College of Business and Economics

Mohamed A. Mekhaimer


University of Memphis; Mansoura University - Faculty of Commerce

September 2013


Abstract:     
Acharya, Myers, and Rajan (2011) develop a model of internal governance where subordinate managers may effectively monitor the CEO to maintain the future of the firm. Using a measure of internal governance based on the difference in horizons between a CEO and his subordinates, we show that firms with better internal governance are more liquid. We also show that internal governance is more effective in enhancing liquidity for firms with CEOs close to retirement, with experienced subordinate managers, and firms that require higher firm-specific skills. Our results are robust to inclusion of conventional governance measures, alternative model specifications, and different measures of internal monitoring and liquidity.

Number of Pages in PDF File: 54

Keywords: Internal monitoring, Corporate governance, Subordinate managers, Liquidity

JEL Classification: G30, G34

working papers series


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Date posted: September 19, 2011 ; Last revised: September 30, 2013

Suggested Citation

Jain, Pawan and Jiang, Christine X. and Mekhaimer, Mohamed A., Powerful Subordinates: Internal Governance and Stock Market Liquidity (September 2013). Available at SSRN: http://ssrn.com/abstract=1929116 or http://dx.doi.org/10.2139/ssrn.1929116

Contact Information

Pawan Jain (Contact Author)
Central Michigan University ( email )
Mt. Pleasant, MI 48858
United States
Christine X. Jiang
University of Memphis - Fogelman College of Business and Economics ( email )
Memphis, TN 38152
United States
901-678¿5315 (Phone)
901-678¿2685 (Fax)
Mohamed A. Mekhaimer
University of Memphis ( email )
Memphis, TN 38152-3370
United States
Mansoura University - Faculty of Commerce ( email )
Mansoura, 35516
Egypt
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