The relationship between liquidity, corporate governance, and firm valuation: Evidence from Russia

Wei-Xuan Li, Clara Chia-Sheng Chen and Joseph French

Emerging Markets Review, 2012, vol. 13, issue 4, 465-477

Abstract: This paper examines the hypotheses that liquidity improves corporate governance, and better governance enhances valuation of Russian firms. We find a positive causal relationship between measures of liquidity and corporate governance. Additionally, we document the strong positive impact of corporate governance on valuation. Our results are economically significant. For example, we document that a 10% decrease in the proportion of zero return days implies a 0.34% increase in transparency and disclosure, which in turn leads to a 9.6% increase in firm valuation. Our research findings shed light on the important role of liquidity in improving corporate governance and valuation.

Keywords: Corporate governance; Liquidity; Russia; Tobin's Q (search for similar items in EconPapers)
JEL-codes: F39 G15 G39 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:13:y:2012:i:4:p:465-477

DOI: 10.1016/j.ememar.2012.07.004

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