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Liquidity, analysts, and institutional ownership

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  • Jiang, Christine X.
  • Kim, Jang-Chul
  • Zhou, Dan
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    Abstract

    In this paper, we investigate the empirical relationship between institutional ownership, number of analysts following and stock market liquidity. We find that firms with larger number of financial analysts following have wider spreads, lower market quality index, and larger price impact of trades. However, we find that firms with higher institutional ownership have narrower spreads, higher market quality index, and smaller price impact of trades. In addition, we show that changes in our liquidity measures are significantly related to changes in institutional ownership over time. These results suggest that firms may alleviate information asymmetry and improve stock market liquidity by increasing institutional ownership. Our results are remarkably robust to different measures of liquidity and measures of information asymmetry.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 20 (2011)
    Issue (Month): 5 ()
    Pages: 335-344

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    Handle: RePEc:eee:finana:v:20:y:2011:i:5:p:335-344

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    Web page: http://www.elsevier.com/locate/inca/620166

    Related research

    Keywords: Spread; Market quality index; Price impact;

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    7. Chung, Kee H. & Zhang, Hao, 2011. "Corporate Governance and Institutional Ownership," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(01), pages 247-273, March.
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    15. Fernando, Chitru S. & Gatchev, Vladimir A. & Spindt, Paul A., 2010. "Institutional Ownership, Analyst Following and Share Prices," Working Papers 10-07, University of Pennsylvania, Wharton School, Weiss Center.
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    Cited by:
    1. Hearn, Bruce & Piesse, Jenifer, 2013. "Firm level governance and institutional determinants of liquidity: Evidence from Sub Saharan Africa," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 93-111.
    2. Ding, Rong & Hou, Wenxuan & Kuo, Jing-Ming & Lee, Edward, 2013. "Fund ownership and stock price informativeness of Chinese listed firms," Journal of Multinational Financial Management, Elsevier, vol. 23(3), pages 166-185.

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