Liquidity, analysts, and institutional ownership

Christine X. Jiang, Jang-Chul Kim and Dan Zhou

International Review of Financial Analysis, 2011, vol. 20, issue 5, 335-344

Abstract: In this paper, we investigate the empirical relationship between institutional ownership, number of analysts following and stock market liquidity. We find that firms with larger number of financial analysts following have wider spreads, lower market quality index, and larger price impact of trades. However, we find that firms with higher institutional ownership have narrower spreads, higher market quality index, and smaller price impact of trades. In addition, we show that changes in our liquidity measures are significantly related to changes in institutional ownership over time. These results suggest that firms may alleviate information asymmetry and improve stock market liquidity by increasing institutional ownership. Our results are remarkably robust to different measures of liquidity and measures of information asymmetry.

Keywords: Spread; Market quality index; Price impact (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:20:y:2011:i:5:p:335-344

DOI: 10.1016/j.irfa.2011.06.004

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