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What determines stock liquidity in Australia?

Journal Article


Abstract


  • Using an index of corporate governance quality (CGQ), we provide the first robust evidence of the determinants of stock liquidity in Australia. We assume that CGQ affects stock liquidity because effective governance decreases information asymmetries between insiders (e.g. managers) and outsiders (e.g. investors), as well as among outsiders, by improving information transparency of a firm. Consistent with agency theory, this study, using 435 large capitalization firms over the period from 2001 to 2008, finds a significant positive relationship between CGQ and stock liquidity, suggesting that better governed firms have a higher level of stock liquidity. These findings are robust to alternative proxies of CGQ, stock liquidity and endogeneity bias.

UOW Authors


  •   Ali, Searat
  •   Liu, Benjamin (external author)
  •   Su, Jen Je (external author)

Publication Date


  • 2016

Citation


  • Ali, S., Liu, B. & Su, J. (2016). What determines stock liquidity in Australia?. Applied Economics, 48 (35), 3329-3344.

Scopus Eid


  • 2-s2.0-84958037419

Number Of Pages


  • 15

Start Page


  • 3329

End Page


  • 3344

Volume


  • 48

Issue


  • 35

Place Of Publication


  • United Kingdom

Abstract


  • Using an index of corporate governance quality (CGQ), we provide the first robust evidence of the determinants of stock liquidity in Australia. We assume that CGQ affects stock liquidity because effective governance decreases information asymmetries between insiders (e.g. managers) and outsiders (e.g. investors), as well as among outsiders, by improving information transparency of a firm. Consistent with agency theory, this study, using 435 large capitalization firms over the period from 2001 to 2008, finds a significant positive relationship between CGQ and stock liquidity, suggesting that better governed firms have a higher level of stock liquidity. These findings are robust to alternative proxies of CGQ, stock liquidity and endogeneity bias.

UOW Authors


  •   Ali, Searat
  •   Liu, Benjamin (external author)
  •   Su, Jen Je (external author)

Publication Date


  • 2016

Citation


  • Ali, S., Liu, B. & Su, J. (2016). What determines stock liquidity in Australia?. Applied Economics, 48 (35), 3329-3344.

Scopus Eid


  • 2-s2.0-84958037419

Number Of Pages


  • 15

Start Page


  • 3329

End Page


  • 3344

Volume


  • 48

Issue


  • 35

Place Of Publication


  • United Kingdom