TY - JOUR
T1 - The effects of stock liquidity on firm value and corporate governance
T2 - Endogeneity and the REIT experiment
AU - Cheung, William Mingyan
AU - Chung, Richard
AU - Fung, Scott
N1 - Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2015/12/1
Y1 - 2015/12/1
N2 - This study examines the effects of stock liquidity on firm value and corporate governance using the Real Estate Investment Trust (REIT) setting. The unique features of the REIT industry, including homogeneity of the investment structures, the high payout requirement, and the importance of institutional investors, highlight the positive effect of stock liquidity on firm value through corporate governance. To address the endogeneity problem, we perform a difference-in-differences test based on the propensity score matching estimator. The result shows that REIT stock liquidity has a causal and positive effect on firm value, as measured by Tobin's Q. Importantly, REIT stock liquidity is conducive to better corporate governance through the channel of institutional ownership. REIT stock liquidity leads to higher institutional ownership, particularly for institutional investor types that are active monitors and institutional investors with multi-firm ownership in their REIT portfolios.
AB - This study examines the effects of stock liquidity on firm value and corporate governance using the Real Estate Investment Trust (REIT) setting. The unique features of the REIT industry, including homogeneity of the investment structures, the high payout requirement, and the importance of institutional investors, highlight the positive effect of stock liquidity on firm value through corporate governance. To address the endogeneity problem, we perform a difference-in-differences test based on the propensity score matching estimator. The result shows that REIT stock liquidity has a causal and positive effect on firm value, as measured by Tobin's Q. Importantly, REIT stock liquidity is conducive to better corporate governance through the channel of institutional ownership. REIT stock liquidity leads to higher institutional ownership, particularly for institutional investor types that are active monitors and institutional investors with multi-firm ownership in their REIT portfolios.
KW - Corporate governance
KW - Endogeneity
KW - Institutional ownership
KW - REITs
KW - Stock liquidity
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U2 - 10.1016/j.jcorpfin.2015.09.001
DO - 10.1016/j.jcorpfin.2015.09.001
M3 - Article
AN - SCOPUS:84944036356
VL - 35
SP - 211
EP - 231
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
SN - 0929-1199
ER -