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Ownership Structure and Stock Market Liquidity

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  • Randi Næs

    (Norges Bank)

Abstract

This paper studies the relationship between company ownership and market liquidity using a panel regression approach. The data sample contains detailed transactions data from a limit order driven stock market, and a full breakdown of company ownership into five distinct owner types as well as outside owner concentration and insider holdings. In line with theoretical predictions, owner concentration is found to be negatively related to spreads and information costs. A somewhat weaker negative relation is also found between spreads and insider holdings. No strong relationship can be documented between liquidity and institutional ownership. Ownership variables which a ect spreads do not in general jointly affect depth in the predicted way, suggesting that spread and depth measure different dimensions of liquidity. Finally, a one-way Granger causality relation from ownership structure to liquidity is hard to document.

Suggested Citation

  • Randi Næs, 2004. "Ownership Structure and Stock Market Liquidity," Working Paper 2004/6, Norges Bank.
    • Handle: RePEc:bno:worpap:2004_06
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    More about this item

    Keywords

    Market Microstructure; Corporate Governance;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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