Investors’ Rights Protection and Firm Liquidity: Evidences from Hong Kong
Posted: 24 Aug 2009
Date Written: August 24, 2009
We examine empirically the relation between stock liquidity and investor rights protection in the context of Hong Kong stock markets. We find that levels of investor protection at both the protective environment level and firm level are positively correlated with stock liquidity, as measured by the bid-ask spreads and market depth, and trading volume. We also find that the investor protection - liquidity relation is more significant at the firm level than at the protective environment level. We conclude that firm level protections dominate legal environment protections.
Keywords: Corporate Governance, Investors’ rights protection, liquidity
JEL Classification: G10, G20, G24
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