Does Control-Ownership Divergence Impair Market Liquidity in an Emerging Market? Evidence from China

Accounting and Finance, Forthcoming

38 Pages Posted: 9 Sep 2014 Last revised: 12 Sep 2014

See all articles by Xiaojun Chu

Xiaojun Chu

Nanjing University of Science and Technology

Qigui Liu

Department of Finance and Accounting, School of Management, Zhejiang University

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies; Macquarie University, Macquarie Business School

Multiple version iconThere are 2 versions of this paper

Date Written: September 7, 2014

Abstract

This paper examines how institutional characteristics of emerging economies influence the effect of control-ownership divergence on market liquidity. We find that the divergence is negatively associated with liquidity, and that this negative relationship is more pronounced in firms with more severe agency problems and information asymmetry. We argue that in an emerging market, the negative effect of the divergence on liquidity is worsened by state ownership and poorer shareholder protection, both of which result in more severe agency conflicts; we also find, however, that this effect is alleviated by the NTS reform, which aligns the interest of different shareholders.

Keywords: Control-ownership divergence; market liquidity; emerging markets; state ownership; Chinese NTS reform

JEL Classification: G14, G32, G34

Suggested Citation

Chu, Xiaojun and Liu, Qigui and Tian, Gary Gang, Does Control-Ownership Divergence Impair Market Liquidity in an Emerging Market? Evidence from China (September 7, 2014). Accounting and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2492706 or http://dx.doi.org/10.2139/ssrn.2492706

Xiaojun Chu

Nanjing University of Science and Technology ( email )

No.219, Ningliu Road
Nanjing, Jiangsu
China

Qigui Liu

Department of Finance and Accounting, School of Management, Zhejiang University ( email )

Hangzhou, Zhejiang Province 310058
China

Gary Gang Tian (Contact Author)

Macquarie University - Department of Applied Finance and Actuarial Studies ( email )

Room 513, Building E4A
North Ryde, NSW, 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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