Ownership Concentration and Stock Liquidity in an Emerging Market

Posted: 7 Aug 2019

See all articles by Nam Tran

Nam Tran

University of Economics Ho Chi Minh City - School of Finance

Cuong Nguyen

Lincoln University (NZ)

Dat Chi Le

Univesity of Economics, Ho Chi Minh City - School of Finance

Date Written: May 31, 2018

Abstract

This study explores the liquidity influence of ownership concentration in the Vietnamese stock market where equity holdings are highly concentrated and under weak protection for minority shareholders. We find that stocks of firms with higher concentrated ownership are less traded in terms of lower share turnover and trading volume. This effect implies the real friction channel, rather than the information friction channel, of ownership concentration impairing stock liquidity. It is from the emerging market context of Vietnam that large shareholders are usually institutional investors who have long-term investment horizons. The result is robust to the different types of blockholders, alternative measures of ownership concentration and stock liquidity, and several regression estimators. It is arguable that Vietnamese firms face a trade-off between the monitoring benefit and the liquidity detriment when opting for concentrated ownership structures.

Keywords: ownership concentration; stock liquidity; real friction; information friction; emerging market; Vietnam

JEL Classification: G12; G14; G18; G23; G34

Suggested Citation

Tran, Nam and Nguyen, Cuong and Le, Dat Chi, Ownership Concentration and Stock Liquidity in an Emerging Market (May 31, 2018). Available at SSRN: https://ssrn.com/abstract=3188189

Nam Tran (Contact Author)

University of Economics Ho Chi Minh City - School of Finance ( email )

279 Nguyen Tri Phuong, District 10
Ho Chi Minh
Vietnam

Cuong Nguyen

Lincoln University (NZ) ( email )

PO Box 85084
Ellesmere Junction Road/Springs Road
Lincoln, 7647
New Zealand

Dat Chi Le

Univesity of Economics, Ho Chi Minh City - School of Finance ( email )

279 Nguyen Tri Phuong, District 10
Ho Chi Minh
Vietnam

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