Executives' Horizon, Internal Governance and Stock Market Liquidity

51 Pages Posted: 19 Sep 2011 Last revised: 23 Jun 2016

See all articles by Pawan Jain

Pawan Jain

University of Wyoming - College of Business - Department of Economics and Finance

Christine X. Jiang

Fudan University

Mohamed A. Mekhaimer

St. John Fisher College

Date Written: June 22, 2016

Abstract

In this article, we examine whether internal governance, the process through which subordinate managers effectively monitor the chief executive officer (CEO), can improve a firm’s liquidity. Using the difference in horizons between a CEO and his immediate subordinates to measure internal governance, we show that firms with better internal governance have lower information asymmetry and higher liquidity. Further, we show that internal governance is effective in enhancing liquidity for firms with CEOs close to retirement, firms that require higher firm-specific skills, and firms with experienced subordinate managers. Our results are robust to inclusion of conventional governance measures, alternative model specifications, and different measures of internal governance and liquidity.

Keywords: executives’ horizon, internal governance, corporate governance, subordinate managers, liquidity

JEL Classification: G30, G34, G39

Suggested Citation

Jain, Pawan and Jiang, Christine X. and Mekhaimer, Mohamed A., Executives' Horizon, Internal Governance and Stock Market Liquidity (June 22, 2016). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1929116 or http://dx.doi.org/10.2139/ssrn.1929116

Pawan Jain (Contact Author)

University of Wyoming - College of Business - Department of Economics and Finance ( email )

P.O. Box 3985
Laramie, WY 82071-3985
United States

Christine X. Jiang

Fudan University ( email )

School of Management
Shanghai, 200433
China
862125011085 (Phone)

Mohamed A. Mekhaimer

St. John Fisher College ( email )

3690 East Avenue
Rochester, NY 14618
United States

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