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The nexus of top management structure, stock liquidity and valuation: a puzzle of the Gordian knot

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  • Yankuo Qiao

    (The George B. Delaplaine Jr. School of Business)

Abstract

Building upon the theories of internal governance and strategic information transmission, the paper strives to examine the relationship between stock liquidity and the degree to which CEOs share executive power and responsibilities with their subordinates. It is found that stock liquidity increases accordingly when the CEO takes the total control or fully delegates to her subordinates, namely when the degree of delegation approaches the two informationally efficient regimes, delegation or centralization. In addition, the regression-based mediating analysis suggests that the liquidity effect driven by the variation of delegation structure is not actively incorporated in stock prices. Accordingly, the portfolio tests demonstrate a strong predictive power of delegation structure for abnormal stock returns. The findings of the study contribute to disentangling the Gordon knot puzzle of top management structure, stock liquidity and firm valuation.

Suggested Citation

  • Yankuo Qiao, 2025. "The nexus of top management structure, stock liquidity and valuation: a puzzle of the Gordian knot," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 49(3), pages 822-853, September.
    • Handle: RePEc:spr:jecfin:v:49:y:2025:i:3:d:10.1007_s12197-025-09721-1
    DOI: 10.1007/s12197-025-09721-1
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    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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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