The Effect of Corporate Governance on Stock Liquidity: The Case of Thailand

41 Pages Posted: 22 Sep 2013

See all articles by Panu Prommin

Panu Prommin

Bank of Thailand

Seksak Jumreonwong

Thammasat University

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Date Written: September 20, 2013

Abstract

Grounded in agency theory, this study explores the effect of corporate governance on equity liquidity in Thailand. Theory suggests that effective governance enhances financial and operational transparency, which in turn, reduces adverse selection. Facing less adverse selection problems, traders provide more liquidity to stocks of well-governed firms. Based on a sample of largest firms in Thailand from 2006 to 2009, our results show a significant relationship between governance and liquidity within firms over time. In particular, within firms, when governance quality increases, liquidity significantly improves. For instance, a rise in governance quality by one standard deviation improves the liquidity ratio by 26.19%. We also show that our results are unlikely confounded by endogeneity.

Keywords: corporate governance, liquidity, Thailand, emerging markets

JEL Classification: G34, G12

Suggested Citation

Prommin, Panu and Jumreonwong, Seksak and Jiraporn, Pornsit, The Effect of Corporate Governance on Stock Liquidity: The Case of Thailand (September 20, 2013). Available at SSRN: https://ssrn.com/abstract=2328865 or http://dx.doi.org/10.2139/ssrn.2328865

Panu Prommin

Bank of Thailand ( email )

273 Samsen Road
Bangkhunprom, Bangkok 10200
United States

Seksak Jumreonwong

Thammasat University ( email )

Bangkok, 10200
Thailand

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
322
Abstract Views
1,211
rank
96,909
PlumX Metrics