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Asian Review of Financial Research, Vol., No..
pp.359~390
pp.359~390
Liquidity, Corporate Governance and Firm Value : Evidence around the World
Kee H. Chung State University of New York (SUNY) at Buffalo
Joon-Seok Kim Korea Capital Market Institute
Kwangwoo Park Korea Advanced Institute of Science and Technology (KAIST)
Taeyoon Sung Yonsei University
In this paper we examine the relation between corporate governance and stock market liquidity around the world where different legal institutions are present. We conjecture that better internal corporate governance is more useful and effective in reducing information asymmetry and thereby increasing stock market liquidity in countries with inferior legal and regulatory environments for shareholder right protection. Consistent with this prediction, we find that liquidity tends to be higher for firms with better internal corporate governance in countries with poor legal and regulatory environments for shareholder right protection (e.g., German civil law countries). In contrast, we find that the relation between internal governance and stock liquidity is not statistically significant in countries with relatively strong shareholder protection laws.
Kee H. Chung
Joon-Seok Kim
Kwangwoo Park
Taeyoon Sung
In this paper we examine the relation between corporate governance and stock market liquidity around the world where different legal institutions are present. We conjecture that better internal corporate governance is more useful and effective in reducing information asymmetry and thereby increasing stock market liquidity in countries with inferior legal and regulatory environments for shareholder right protection. Consistent with this prediction, we find that liquidity tends to be higher for firms with better internal corporate governance in countries with poor legal and regulatory environments for shareholder right protection (e.g., German civil law countries). In contrast, we find that the relation between internal governance and stock liquidity is not statistically significant in countries with relatively strong shareholder protection laws.
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