Corporate Governance, Disclosure and Market Liquidity

43 Pages Posted: 11 Mar 2009 Last revised: 26 May 2015

Date Written: May 4, 2015


This paper investigates how corporate decisions such as the choice of corporate governance mechanisms or information disclosure by management, affect firm stock liquidity. The model studies the interaction between a firm's manager and its shareholders and shows that the quality of the firm's dividend report, a result of this interaction, affects information asymmetry in the financial market, and therefore, liquidity. Interestingly, the effect of disclosure quality on liquidity is non-monotonical. The model also highlights the complementarity between internal and external corporate governance mechanisms. Thus, the optimal level of disclosure required to maximize market liquidity increases in the quality of the firm's internal corporate governance mechanisms.

Keywords: Corporate governance, disclosure regulation, market liquidity

JEL Classification: G12, G14

Suggested Citation

Dumitrescu, Ariadna, Corporate Governance, Disclosure and Market Liquidity (May 4, 2015). Available at SSRN: or

Ariadna Dumitrescu (Contact Author)

ESADE Business School ( email )

Av. Pedralbes 60-62
Barcelona, 08034

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics