Probability of Information-Based Trading, Intraday Liquidity and Corporate Governance in the Brazilian Stock Market

19 Pages Posted: 9 Apr 2007

See all articles by Claudio Henrique Barbedo

Claudio Henrique Barbedo

The COPPEAD Graduate School of Business at the Federal University of Rio de Janeiro (UFRJ)

Eduardo Camilo-da-Silva

Coppead/UFRJ

Ricardo P. C. Leal

The COPPEAD Graduate School of Business

Date Written: April, 2007

Abstract

Non-traditional listing rules on stock exchanges based on corporate governance practices criteria may ensure investors a higher level of protection and constrain expropriation of minority shareholders. We investigate how distinct listing levels, different according to the quality of corporate governance practices, a natural experiment provided by the Brazilian stock exchange (Bovespa), and liquidity levels are associated to the probability of informed trading (PIN) using the number of intraday buy and sell orders. We find that PIN is lower in stricter corporate governance practices listing levels, after controlling for liquidity. Greater liquidity is associated to a lower PIN particularly due to the presence of non-informed investors.

Keywords: PIN; Listing requirements, emerging markets, corporate governance, insider trading

JEL Classification: G14, G15, G34

Suggested Citation

Barbedo, Claudio Henrique and Camilo-da-Silva, Eduardo and Leal, Ricardo Pereira Câmara, Probability of Information-Based Trading, Intraday Liquidity and Corporate Governance in the Brazilian Stock Market (April, 2007). Available at SSRN: https://ssrn.com/abstract=978759 or http://dx.doi.org/10.2139/ssrn.978759

Claudio Henrique Barbedo

The COPPEAD Graduate School of Business at the Federal University of Rio de Janeiro (UFRJ) ( email )

Rua 36 n. 355
Rio de Janeiro, 21949-900
Brazil

Eduardo Camilo-da-Silva

Coppead/UFRJ ( email )

Rua 36 n. 355
Rio de Janeiro, 21949-900
Brazil

Ricardo Pereira Câmara Leal (Contact Author)

The COPPEAD Graduate School of Business ( email )

Rua Pascoal Lemme
355 - Cidade Universitária
Rio de Janeiro, Rio de Janeiro 21941-918
Brazil
39389871 (Phone)

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