TY - JOUR
T1 - The impact of corporate governance and earnings management on stock market liquidity in a highly concentrated ownership capital market
AU - Bar-Yosef, Sasson
AU - Prencipe, Annalisa
PY - 2013/7
Y1 - 2013/7
N2 - We provide insights to the effects of corporate governance mechanisms and earnings management on market liquidity (measured by bid-ask spreads [B-As] and trading volume) in a setting characterized by highly concentrated noninstitutional ownership. First, we document that high noninstitutional ownership increases B-As and depresses trading volumes. Next, we show that volume of trade tends to be higher and B-A tends to be lower for firms with better corporate governance mechanisms (e.g., board independence and CEO-chairman separation) when there is high concentration of noninstitutional ownership. In contrast to prior findings, when controlling for corporate governance quality, B-As are unaffected by earnings management, while trading volume increases when earnings management is higher, presumably due to an increase in investor disagreement. Our results are robust to changes in the market trading system across the sample period.
AB - We provide insights to the effects of corporate governance mechanisms and earnings management on market liquidity (measured by bid-ask spreads [B-As] and trading volume) in a setting characterized by highly concentrated noninstitutional ownership. First, we document that high noninstitutional ownership increases B-As and depresses trading volumes. Next, we show that volume of trade tends to be higher and B-A tends to be lower for firms with better corporate governance mechanisms (e.g., board independence and CEO-chairman separation) when there is high concentration of noninstitutional ownership. In contrast to prior findings, when controlling for corporate governance quality, B-As are unaffected by earnings management, while trading volume increases when earnings management is higher, presumably due to an increase in investor disagreement. Our results are robust to changes in the market trading system across the sample period.
KW - Corporate governance
KW - Earnings management
KW - Market liquidity
KW - Ownership concentration
UR - http://www.scopus.com/inward/record.url?scp=84889033653&partnerID=8YFLogxK
U2 - 10.1177/0148558X13492591
DO - 10.1177/0148558X13492591
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AN - SCOPUS:84889033653
SN - 0148-558X
VL - 28
SP - 292
EP - 316
JO - Journal of Accounting, Auditing and Finance
JF - Journal of Accounting, Auditing and Finance
IS - 3
ER -