Board Interlocks and Stock Liquidity: New Evidence from an Emerging Market
44 Pages Posted: 4 Feb 2021 Last revised: 9 Jul 2021
Date Written: December 18, 2020
This study examines the implications of board interlocks on stock liquidity using a sample of listed Brazilian firms. The instrumental variable two-stage least squares estimation is used to minimize endogeneity concerns. This study provides evidence that board interlocks are positively related to stock liquidity. Our cross-sectional study findings reveal that the impact of board interlocks on stock liquidity is more pronounced for firms with high uncertainty, in competitive industries, and with poor governance. Our findings suggest that board interlocks aid businesses in accessing external capital from potential investors.
Keywords: Board interlocks, Brazil, information asymmetry, signaling theory, stock liquidity
JEL Classification: D85, G10, G14, L14
Suggested Citation: Suggested Citation