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What determines stock liquidity in Australia?

Author

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  • Searat Ali
  • Benjamin Liu
  • Jen Je Su

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.

Suggested Citation

  • Searat Ali & Benjamin Liu & Jen Je Su, 2016. "What determines stock liquidity in Australia?," Applied Economics, Taylor & Francis Journals, vol. 48(35), pages 3329-3344, July.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:35:p:3329-3344
    DOI: 10.1080/00036846.2015.1137552
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    Citations

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    Cited by:

    1. Jia Jia Hing & Yee Peng Chow, 2022. "Influence of institutional investor heterogeneity on stock liquidity and its underlying liquidity channels," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 14(3), pages 252-278.
    2. Hussein Abedi Shamsabadi & Byung-Seong Min & Richard Chung, 2016. "Corporate governance and dividend strategy: lessons from Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(5), pages 583-610, October.
    3. Talie Kassamany & Bernard Zgheib, 2023. "Impact of government policy responses of COVID‐19 pandemic on stock market liquidity for Australian companies," Australian Economic Papers, Wiley Blackwell, vol. 62(1), pages 24-46, March.
    4. Ghosh, Sumita, 2021. "Urban agriculture potential of home gardens in residential land uses: A case study of regional City of Dubbo, Australia," Land Use Policy, Elsevier, vol. 109(C).
    5. Meskat Ibne Sharif, 2023. "Parametric test of liquidity wavering in response to the dynamic equity constituents," SN Business & Economics, Springer, vol. 3(1), pages 1-26, January.
    6. Al-Raeai, Arafat Mansoor & Zainol, Zairy & Abdul Rahim, Ahmad Khilmy, 2019. "The Influence of Macroeconomics Factors and Political Risk on the Sukuk Market Development in Selected GCC Countries: A Panel Data Analysis," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(2), pages 199-211.
    7. Searat Ali & Benjamin Liu & Jen Je Su, 2022. "Does corporate governance have a differential effect on downside and upside risk?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(9-10), pages 1642-1695, October.
    8. Troshani, Indrit & Janssen, Marijn & Lymer, Andy & Parker, Lee D., 2018. "Digital transformation of business-to-government reporting: An institutional work perspective," International Journal of Accounting Information Systems, Elsevier, vol. 31(C), pages 17-36.
    9. Shamsabadi, Hussein Abedi & Tebourbi, Imen & Nourani, Mohammad & Min, Byung S., 2021. "Corporate Governance and Dividend Reinvestment Plans: Insights from Imputation Tax in Australia," Finance Research Letters, Elsevier, vol. 41(C).
    10. Yang, Xin & Jin, Cheng & Huang, Chuangxia & Yang, Xiaoguang, 2023. "Network characteristics and stock liquidity:Evidence from the UK," Finance Research Letters, Elsevier, vol. 53(C).
    11. Ahmed, Ammad & Ali, Searat, 2017. "Boardroom gender diversity and stock liquidity: Evidence from Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 13(2), pages 148-165.
    12. Nadarajah, Sivathaasan & Ali, Searat & Liu, Benjamin & Huang, Allen, 2018. "Stock liquidity, corporate governance and leverage: New panel evidence," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 216-234.
    13. Small, Felicity & Mehmet, Michael & Miles, Morgan P., 2019. "Applying a causal ambush marketing framework to social media: The ‘Pleasure is Diverse’ campaign and the Australian marriage amendment," Australasian marketing journal, Elsevier, vol. 27(3), pages 149-157.
    14. Abdulaziz Mohammed Alsahlawi & Mohammed Abdullah Ammer, 2017. "Corporate Governance, Ownership Structure and Stock Market Liquidity in Saudi Arabia: A Conceptual Research Framework," Accounting and Finance Research, Sciedu Press, vol. 6(4), pages 1-17, Novebmer.
    15. Jonathan Batten & Xuan Vinh Vo, 2019. "Liquidity And Firm Value In An Emerging Market," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(02), pages 365-376, March.
    16. Hamdan Amer Al-Jaifi & Ahmed Hussein Al-rassas & Adel Ali AL-Qadasi, 2017. "Corporate governance strength and stock market liquidity in Malaysia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 13(5), pages 592-610, August.
    17. Ali, Searat & Liu, Benjamin & Su, Jen Je, 2018. "Does corporate governance quality affect default risk? The role of growth opportunities and stock liquidity," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 422-448.
    18. Zhou, Fan & Zheng, Zuduo & Whitehead, Jake & Washington, Simon & Perrons, Robert K. & Page, Lionel, 2020. "Preference heterogeneity in mode choice for car-sharing and shared automated vehicles," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 633-650.

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