Abstract
We study the relation between corporate governance, market liquidity and stock price informativeness. Firms with more informative stock prices are associated with larger transaction volume, larger bid-ask spread and better corporate governance. Thisliquidity-informativeness relation is significant for firms with high antitakeover provision (bad corporate governance). However, bid-ask spread is insignificantly associated withprice informativeness for firms with less antitakeover provision (good corporate governance). This supports that firm-specific return variation better measures stock price informativeness when firm has strong corporate governance framework. Our results suggest that (i) more (less) informed trading activities associated with weak (strong) corporate governance, and (ii) corporate governance explains the cross-sectional variation in information efficiency of stock prices. Our results are consistent with theories in financial market learning that investor learn from informed trading activities associated with weak governance firms and informative disclosure from strong governance firms.
| Original language | English |
|---|---|
| Pages (from-to) | 9-15 |
| Number of pages | 7 |
| Journal | Corporate Ownership and Control |
| Volume | 8 |
| Issue number | 3 A |
| Publication status | Published - 2011 |
| Externally published | Yes |
Fingerprint
Keywords
- Bid-ask spread
- Corporate governance
- Market liquidity
- Stock price informativeness
- Trading volume
ASJC Scopus subject areas
- Business, Management and Accounting(all)
Cite this
Corporate governance and the divergence of learning channels. / Cheung, Ming Yan William; Lei, Adrian; Tao, Libin.
In: Corporate Ownership and Control, Vol. 8, No. 3 A, 2011, p. 9-15.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Corporate governance and the divergence of learning channels
AU - Cheung, Ming Yan William
AU - Lei, Adrian
AU - Tao, Libin
PY - 2011
Y1 - 2011
N2 - We study the relation between corporate governance, market liquidity and stock price informativeness. Firms with more informative stock prices are associated with larger transaction volume, larger bid-ask spread and better corporate governance. Thisliquidity-informativeness relation is significant for firms with high antitakeover provision (bad corporate governance). However, bid-ask spread is insignificantly associated withprice informativeness for firms with less antitakeover provision (good corporate governance). This supports that firm-specific return variation better measures stock price informativeness when firm has strong corporate governance framework. Our results suggest that (i) more (less) informed trading activities associated with weak (strong) corporate governance, and (ii) corporate governance explains the cross-sectional variation in information efficiency of stock prices. Our results are consistent with theories in financial market learning that investor learn from informed trading activities associated with weak governance firms and informative disclosure from strong governance firms.
AB - We study the relation between corporate governance, market liquidity and stock price informativeness. Firms with more informative stock prices are associated with larger transaction volume, larger bid-ask spread and better corporate governance. Thisliquidity-informativeness relation is significant for firms with high antitakeover provision (bad corporate governance). However, bid-ask spread is insignificantly associated withprice informativeness for firms with less antitakeover provision (good corporate governance). This supports that firm-specific return variation better measures stock price informativeness when firm has strong corporate governance framework. Our results suggest that (i) more (less) informed trading activities associated with weak (strong) corporate governance, and (ii) corporate governance explains the cross-sectional variation in information efficiency of stock prices. Our results are consistent with theories in financial market learning that investor learn from informed trading activities associated with weak governance firms and informative disclosure from strong governance firms.
KW - Bid-ask spread
KW - Corporate governance
KW - Market liquidity
KW - Stock price informativeness
KW - Trading volume
UR - http://www.scopus.com/inward/record.url?scp=84897129023&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84897129023&partnerID=8YFLogxK
M3 - Article
AN - SCOPUS:84897129023
VL - 8
SP - 9
EP - 15
JO - Corporate Ownership and Control
JF - Corporate Ownership and Control
SN - 1727-9232
IS - 3 A
ER -