Loukil, Nadia and Yousfi, Ouidad (2010): Does corporate governance affect stock liquidity in the Tunisian Stock Market?
Download (179kB) | Preview
The aim of the current paper is to study the link between the effects of corporate governance on information asymmetry problems and stock liquidity in the Tunisian Stock Market. We use a sample of 49 Tunisian firms listed between 1998 and 2007. Our results show that corporate governance has direct and indirect effects on stock liquidity. Threat of expropriation exerted by family and foreign shareholders discourages reluctant investors,which decreases stock liquidity. In contrast, they invest their capital in State controlled firms. In fact, State is regarded as an effective controller rather than a shareholder. The State involvement in Tunisian firms is considered as state guarantee for investors, which increases stock liquidity. Our results provide evidence that some attributes of corporate governance improve stock liquidity because they reduce information asymmetry.
|Item Type:||MPRA Paper|
|Original Title:||Does corporate governance affect stock liquidity in the Tunisian Stock Market?|
|English Title:||Does corporate governance affect stock liquidity in the Tunisian Stock Market?|
|Keywords:||corporate governance, shareholder identity, stock liquidity, Tunisian Stock Exchange|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance
G - Financial Economics > G1 - General Financial Markets > G10 - General
|Depositing User:||Ouidad YOUSFI|
|Date Deposited:||07. Feb 2011 19:48|
|Last Modified:||14. Feb 2013 23:57|
Adams, R. and Ferreira D., 2008, “Regulatory pressure and bank directors’ incentives to attend board meetings”. Working Paper, University of Queensland.
Adams, R. and Mehran H., 2003, “Is corporate governance different for bank holding companies”. FRBNY Economic Policy Review, Vol. 9, No.1, pp.123-142.
Aktas N., Bodt E., Declerck F. and Van Oppens H., 2007, “The PIN anomaly around M&A announcements.” Journal of Financial Markets, Vol.10, No. 2, pp.169-191.
Amihud Y. and Mendelson H., 1986, “Asset pricing and the bid–ask spread.” Journal of Financial Economics, Vol. 17, No.2, pp.223–249.
Amihud Y., 2002, “Illiquidity and stock returns: cross-section and time-series effects.” Journal of Financial Markets, Vol. 5, No.1, pp.31–56.
Amihud, Y. and Mendelson, H., 2008, “Liquidity, the Value of the Firm, and Corporate Finance”. Journal of Applied Corporate Finance, Vol.20, No.2, pp. 32-45.
Ang J.S. and Ding D.K., 2006, “Government ownership and the performance of government-linked companies: The case of Singapore.” Journal of Multinational Financial Management, Vol. 16, No.1, pp. 64–88.
Attig N., Fong W.M., Gadhoum Y. and Lang L.H.P., 2006, “Effects of Large Shareholding on Information Asymmetry and Stock Liquidity.” Journal of Banking and Finance, Vol.30, No.10, pp. 2875-2892.
Becher D.A. and Frye M.B., 2010, “Does regulation substitute or complement governance?” Journal of Banking and Finance, Forthcoming.
Belkhir B. N. and Bouri A., 2008, “Ownership structure and bid ask spread: evidence from Tunisian companies.” Corporate Ownership and Control, Vol.5, No.3, pp. 445-451.
Ben Ali C., 2009, “Disclosure Quality and Corporate Governance in a Context of Minority Expropriation”. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1406149.
Ben Sedrine N. and Loukil N., 2008, “Block holders, board structure and liquidity: evidence from Tunis Stock Exchange.” Corporate Ownership and Control, Vol.5, No.3, pp. 428-433.
Booth, J. R., Cornett M.M., and Tehranian H., 2002, “Boards of directors, ownership, and regulation”. Journal of Banking and Finance, Vol. 26, No.10, pp.1973-1996.
Brennan M. J. and Subrahmanyam A., 1996, “Market microstructure and asset pricing: On the compensation for illiquidity in stock returns.” Journal of Financial Economics, Vol.41, N°3, pp. 441–464.
Brockman P. and Chung D., 2003, “Investor protection and firm liquidity.” Journal of Finance, Vol. 58, N°2, pp. 921–937.
Brockman P. and Chung D., 2008, “Investor protection, adverse selection, and the probability of informed trading.” Review of Quantitative Finance and Accounting, Vol. 30,N°2, pp. 111–131.
Brown B. and Hillegeist S.A., 2007, “How disclosure quality affects the level of information Asymmetry.” Review of Accounting Studies, Vol. 12, N°2-3, pp. 443–477.
Cai C.X., Keasey K. and Short H., 2006, “Corporate Governance and Information Efficiency in Security Markets.” European Financial Management, Vol. 12, N°5, pp. 763– 787.
Caprio, G., Laeven, L. and Levine, R., 2007, Governance and banks valuations.Journal of Financial Intermediation, Vol.16, No.4, pp. 584–617.
Chae J., 2005, “Trading Volume, Information Asymmetry, and Timing Information.” Journal of Finance, Vol.60, No.1, pp. 413-442.
Chen K.C.W., Chen Z. and Wei K.C.J., 2009, “Legal protection of investors, corporate governance, and the cost of equity capital.” Journal of Corporate Finance, Vol.15, No.3, pp. 273-289.
Chen W.P., Chung H., Lee C. and Liao W.L., 2007, “Corporate Governance and Equity Liquidity: analysis of S&P transparency and disclosure rankings.” Corporate Governance An International Review, Vol.15, No.4, pp. 644-660.
Chi, W., Wang, Y., (2009). Ownership, performance and executive turnover in China. Journal of Asian Economics, 20(4), 465-478.
Chordia T., Subrahmanyam A. and Anshuman V., 2001, “Trading activity and expected stock returns.” Journal of Financial Economics, Vol. 59, N°1, pp. 3– 32.
Chung K.H., Elder J. and Kim J., 2010, “Corporate governance and liquidity”. Journal of Financial and Quantitative Analysis, Forthcoming.
Claessens S., Djankov S., Fan J. P. H. and Lang L. H. P., 2002, “Disentangling the incentive and entrenchment effects of large shareholdings.” Journal of Finance, Vol.57, No.6, pp. 2741–2771.
Claessens, S., Djankov, S., Lang, L., 2000, “The separation of ownership and control in East Asian corporations”, Journal of Financial Economics, Vol.58, No.1, pp.81–112.
Dahya J., Dimitrov O. and McConnell J. J., 2008, “Dominant shareholders, corporate boards, and corporate value: A cross-country analysis.” Journal of Financial Economics, Vol.87, No.1, pp. 73-100.
De Andres P. and Vallelado E., 2008, “Corporate governance in banking: The role of the board of directors”. Journal of Banking and Finance, Vol. 32, No12, pp. 257–258.
Diamond D. and Verrecchia R., 1991, “Disclosure, liquidity, and the cost of capital.” Journal of Finance, Vol.46, No.4, pp. 1325-1359.
Durnev A. and Kim E.H., 2005, “To steal or not to steal: firm attributes, legal environment, and valuation.” Journal of Finance, Vol. 60, N°3, pp. 1461–1493.
Dyck A., 2000, “Ownership Structure, Legal Protections and Corporate Governance”.Working Paper, Harvard Business School.
Easley D., Kiefer N., O’Hara M. and Paperman J., 1996, “Liquidity, information, and less-frequently traded stocks.” Journal of Finance, Vol.51, No.4, pp. 1405–1436.
Eleswarapu V. and Reinganum M., 1993, “The seasonal behaviour of liquidity premium in asset pricing.” Journal of Financial Economics, Vol.34, No.3, pp. 373–386.
Faccio M., Lang L.P.H. and Young L., 2001, “Dividends and expropriation.”American Economic Review, Vol.91, No.1, pp. 54-78.
Firth, M., Fung, P.M.Y., Rui, O. M., 2007, “How ownership and corporate governance influence chief executive pay in China's listed firms”. Journal of Business Research, Vol.60, No.7, pp.776-785.
Gana M. and Chemli C., 2008, “Gouvernance et liquidité : Cas du marché boursier Tunisien.” Euro-Mediterranean Economics and Finance Review, Vol.3, No.1, pp. 128-139.
Giannetti and Simonov (2006), “Which Investors Fear Expropriation: choices Evidence from Investors' Portfolio Choices”. Journal of finance, Vol.61, No.3,pp. 1507-1547.
Haddad. A.E., AlShattarat W.K. and Nobanee H., 2009, “Voluntary disclosure and stock market liquidity: evidence from the Jordanian capital market”. International Journal of Accounting, Auditing and Performance Evaluation, Vol.5, No.3, pp. 285 – 309.
Handa P. and Schwartz R.A., 1996, “How best to supply liquidity to a securities market.” The Journal of Portfolio Management, Vol. 22, 44-51.
Heflin F. and Shaw W.K., 2000, “Block holder Ownership and Market Liquidity.” Journal of Financial and Quantitative Analysis, Vol.35, No.4, pp. 621-633.
Heflin F., Shaw K.W. and Wild J. J., 2005. “Disclosure policy and market liquidity: Impact of depth quotes and order sizes.” Contemporary Accounting Research, Vol.22, No.4, pp. 829–866.
Hmaied D.M., Grar A. and Sioud B.O., 2006, “Dynamics of Market Liquidity of Tunisian Stocks: An Analysis of Market Resiliency.” Electronic Markets, Vol.16, No.2, pp. 140-153.
Joskow, P. Rose N. and Shepard A., 1993, “Regulatory constraints on CEO compensation”. Brookings Papers on Economic Activity: Microeconomics, Vol.1993, No.1, pp.1-72.
Kanagaretnam K., Lobo G.J. and Whalen D.J., 2007, “Does good corporate governance reduce information asymmetry around quarterly earnings announcements?” Journal of Accounting and Public Policy, Vol.26, No.4, pp. 497-522.
Kim O. and Verrecchia R., 1994, “Market liquidity and volume around earnings announcements.” Journal of Accounting and Economics, Vol.17, No.1-2, pp. 41–68.
Kim O. and Verrecchia R.E., 1991, “Market reaction to anticipated announcements.” Journal of Financial Economics, Vol.30, No.2, pp. 273–309.
Klapper L.F. and Love I., 2004, “Corporate Governance, Investor Protection, and Performance in Emerging Markets.” Journal of Corporate Finance, Vol. 10, pp. 703– 728.
La Porta R., Lopez-de-Silanes F. and Shleifer A., 1999, “Corporate ownership around the world.” Journal of Finance, Vol. 54, N°2, pp. 471-518.
La Porta R., Lopez-de-Silanes F., Shleifer A. and Vishny R., 1997, “Legal determinants of external finance.” Journal of Finance, Vol. 52, pp. 1131–1150.
La Porta R., Lopez-de-Silanes F., Shleifer A. and Vishny R., 1998, “Law and finance.” Journal of Political Economy, Vol. 106, pp. 1113–1155.
La Porta R., Lopez-de-Silanes F., Shleifer A. and Vishny R., 2000, “Investor protection and corporate governance.” Journal of Financial Economics, Vol. 58, N°1-2, pp. 3–27.
La Porta R., Lopez-de-Silanes F., Shleifer A. and Vishny R., 2000, “Investor protection and corporate governance.” Journal of Financial Economics, Vol. 58, N°1, pp. 3– 27.
Lesmond D., Ogden J. and Trzcinka C., 1999, “A New Estimate of Transaction Costs.” Review of Financial Studies, Vol.12, No.5, pp. 1113-1141.
Lesmond D.A., 2005, “Liquidity of emerging markets.” Journal of Financial Economics, Vol.77, No.2, pp. 411–452.
Liu W., 2006, “A liquidity-augmented capital asset pricing model.” Journal of financial Economics, Vol. 82, N°3, pp. 631-671.
Loukil N., Zayani M.B. and Omri A.,2010, “Impact of Liquidity on Stock Returns: An Empirical Investigation of the Tunis Stock Market”. Macroeconomics and Finance in Emerging Market Economies, Vol. 3, No.2, pp. 261 - 283.
Matoussi H., Karaa A. and Maghraoui R., 2004, “Information Asymmetry, Disclosure Level and Securities Liquidity in the BVMT.” Finance India, Vol. 18, spi, pp:547-557.
Maury B., 2006, “Family ownership and firm performance: Empirical evidence from Western European corporations”. Journal of Corporate Finance, Vol.12, No.2, pp. 321– 341.
Omran, M. M., Bolbol, A., Fatheldin, A. (2008) “Corporate governance and firm performance in Arab equity markets: Does ownership concentration matter?” International Review of Law and Economics, Vol.28, No.1, pp.32–45.
Omri A., 2003, “Systèmes de gouvernance et performance des entreprises tunisiennes.” Revue Française de Gestion, Vol.1, No.142, pp. 85-100.
Pedersen T. and Thomsen S., 2003, “Ownership Structure and Value of the Largest European Firms: The Importance of Owner Identity.” Journal of Management and Governance, Vol.7, No.1, pp. 27-55.
Rhee S.G. and Wang J., 2009, “Foreign institutional ownership and stock market liquidity: Evidence from Indonesia.” Journal of Banking and Finance, Vol.33, No.7, pp.1312-1324.
Rubin A., 2007, “Ownership level, ownership concentration, and liquidity.” Journal of Financial Markets, Vol.10, No.3, pp. 219–248.
Shleifer A. and Vishny R.W., 1997, “A survey of Corporate governance.” Journal of Finance, Vol.52, No.2, pp. 737-783.
Thomsen S. and Pedersen T., 2000, “Ownership Structure and Economic performance in the Largest European companies.” Strategic Management Journal, Vol.21, No.6, pp. 689–705.
Welker M., 1995, “Disclosure Policy, Information Asymmetry, and Liquidity in Equity Markets.” Contemporary Accounting Research, Vol.11, No.2, pp. 801–827.
Wu S., Xu N. and Yuan Q., 2009, “State Control, Legal Investor Protection, and Ownership Concentration: Evidence from China.” Corporate Governance: An International Review, Vol.17, No.2, pp. 176 – 192.