Economic Policy Uncertainty and Stock Liquidity: The Role of Board Networks in an Emerging Market

41 Pages Posted: 12 Jul 2021

See all articles by William Mbanyele

William Mbanyele

Center for Economic Research, Shandong University

Date Written: December 24, 2020

Abstract

This study examines the role of board networks in promoting stock liquidity in periods of heightened economic policy uncertainty using a sample of Brazilian firms from 2002-2018. Firstly, the findings show that economic policy uncertainty disproportionately contributes to stock illiquidity. This impact is mainly prominent for high-risk companies, small firms and firms in competitive industries. Secondly, we provide evidence that board networks promote stock liquidity more via the information channel when economic policy uncertainty is very high. Unlike other studies that focus on the adverse effects of economic policy uncertainty on firm outcomes, our novel contribution is that we uncover the role of board networks in mitigating the negative effects of economic policy uncertainty on stock liquidity.

Keywords: Brazil, board interlock, director network; economic policy uncertainty, emerging market, information asymmetry, corporate governance, stock liquidity.

JEL Classification: D85; G14; G18; G34; L14

Suggested Citation

Mbanyele, William, Economic Policy Uncertainty and Stock Liquidity: The Role of Board Networks in an Emerging Market (December 24, 2020). Available at SSRN: https://ssrn.com/abstract=3883220 or http://dx.doi.org/10.2139/ssrn.3883220

William Mbanyele (Contact Author)

Center for Economic Research, Shandong University ( email )

Jinan, SD Shandong 250100
China

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