IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Intraday market liquidity, corporate governance, and ownership structure in markets with weak shareholder protection: evidence from Brazil and Chile

Listed author(s):
  • Diego Cueto

    ()

  • Lorne Switzer

    ()

This paper investigates the effects of very highly concentrated ownership structures on the liquidity of stock markets in a context of weak protection for minority shareholders. Such structures are prevalent in a number of European markets as well as in various developing markets, as opposed to US markets. Two alternative hypotheses are tested. The shareholder expropriation hypothesis predicts an inverse relationship between liquidity and ownership concentration for the dominant shareholder. The dominant monitor-insider hypothesis contends that dominant shareholders are not detrimental to market liquidity, since they have incentives to reduce their costs of exit and/or to improve the information transfer of their value enhancing activities to markets. Our empirical results are more consistent with the latter. We find that alternative governance mechanisms also have liquidity enhancing effects for Brazilian and Chilean firms. In particular, cross-listing in the US market and the threat of outside takeovers serve as monitoring devices to reduce informational asymmetries. Copyright Springer Science+Business Media New York 2015

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1007/s10997-013-9263-8
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer & Accademia Italiana di Economia Aziendale (AIDEA) in its journal Journal of Management & Governance.

Volume (Year): 19 (2015)
Issue (Month): 2 (May)
Pages: 395-419

as
in new window

Handle: RePEc:kap:jmgtgv:v:19:y:2015:i:2:p:395-419
DOI: 10.1007/s10997-013-9263-8
Contact details of provider: Web page: http://www.springer.com

Postal:

Via Cairoli 10 40121 Bologna

Web page: http://www.accademiaaidea.it/en
Email:


More information through EDIRC

Order Information: Web: http://www.springer.com/new+%26+forthcoming+titles+%28default%29/journal/10997/PS2

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why are foreign firms listed in the U.S. worth more?," Journal of Financial Economics, Elsevier, vol. 71(2), pages 205-238, February.
  2. Chordia, Tarun & Roll, Richard & Subrahmanyam, Avanidhar, 2008. "Liquidity and market efficiency," Journal of Financial Economics, Elsevier, vol. 87(2), pages 249-268, February.
  3. Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
  4. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
  5. Becht, Marco, 1999. "European corporate governance: Trading off liquidity against control," European Economic Review, Elsevier, vol. 43(4-6), pages 1071-1083, April.
  6. Patrick Bolton & Ernst-Ludwig von Thadden, 1998. "Blocks, Liquidity, and Corporate Control," Journal of Finance, American Finance Association, vol. 53(1), pages 1-25, 02.
  7. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  8. Lesmond, David A., 2005. "Liquidity of emerging markets," Journal of Financial Economics, Elsevier, vol. 77(2), pages 411-452, August.
  9. Rubin, Amir, 2007. "Ownership level, ownership concentration and liquidity," Journal of Financial Markets, Elsevier, vol. 10(3), pages 219-248, August.
  10. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
  11. Antoine Faure-Grimaud, 2004. "Public Trading and Private Incentives," Review of Financial Studies, Society for Financial Studies, vol. 17(4), pages 985-1014.
  12. Holmstrom, Bengt & Tirole, Jean, 1993. "Market Liquidity and Performance Monitoring," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 678-709, August.
  13. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
  14. Ellis, Katrina & Michaely, Roni & O'Hara, Maureen, 2000. "The Accuracy of Trade Classification Rules: Evidence from Nasdaq," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(04), pages 529-551, December.
  15. Reena Aggarwal & Isil Erel & René Stulz & Rohan Williamson, 2010. "Differences in Governance Practices between U.S. and Foreign Firms: Measurement, Causes, and Consequences," Review of Financial Studies, Society for Financial Studies, vol. 23(3), pages 3131-3169, March.
  16. Doidge, Craig, 2004. "U.S. cross-listings and the private benefits of control: evidence from dual-class firms," Journal of Financial Economics, Elsevier, vol. 72(3), pages 519-553, June.
  17. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 08-96, Wharton School Rodney L. White Center for Financial Research.
  18. Khanna, Tarun & Yafeh, Yishay, 2005. "Business Groups in Emerging Markets: Paragons or Parasites?," CEPR Discussion Papers 5208, C.E.P.R. Discussion Papers.
  19. Sílvia Mourthé Valadares & Ricardo Pereira Câmara Leal, 2000. "Ownership And Control Structure Of Brazilian Companies," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 3(1), pages 29-56.
  20. Maug, Ernst, 2002. "Insider trading legislation and corporate governance," European Economic Review, Elsevier, vol. 46(9), pages 1569-1597, October.
  21. Chung, Kee H. & Elder, John & Kim, Jang-Chul, 2010. "Corporate Governance and Liquidity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(02), pages 265-291, April.
  22. Brockman, Paul & Chung, Dennis Y. & Yan, Xuemin (Sterling), 2009. "Block Ownership, Trading Activity, and Market Liquidity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(06), pages 1403-1426, December.
  23. Lins, Karl V., 2003. "Equity Ownership and Firm Value in Emerging Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 159-184, March.
  24. Dahya, Jay & Dimitrov, Orlin & McConnell, John J., 2008. "Dominant shareholders, corporate boards, and corporate value: A cross-country analysis," Journal of Financial Economics, Elsevier, vol. 87(1), pages 73-100, January.
  25. Khanna, Tarun & Yafeh, Yishay, 2005. "Business Groups in Emerging Markets: Paragons or Parasites?," CEI Working Paper Series 2005-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  26. Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-746, June.
  27. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
  28. Chenchuramaiah T. Bathala & Kenneth P. Moon & Ramesh P. Rao, 1994. "Managerial Ownership, Debt Policy, and the Impact of Institutional Holdings: An Agency Perspective," Financial Management, Financial Management Association, vol. 23(3), Fall.
  29. Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 377-397, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kap:jmgtgv:v:19:y:2015:i:2:p:395-419. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

or (Rebekah McClure)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.