Fiduciary or loyalty? Evidence from top management counsel and stock liquidity

Michael Michael, Muhammad Jahangir Ali, Nader Atawnah and Balachandran Muniandy

Global Finance Journal, 2022, vol. 52, issue C

Abstract: We examine whether and how corporate top management counsel (TMC) influences stock liquidity and document a significant positive association. Our results remained robust to a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. We identify a reduction in information asymmetry and business risk as the channel through which TMC affects stock liquidity. Further tests reveal that the positive relationship is stronger when the CEO has no legal expertise and in the post-SOX period, where firms are mandated to have in-house counsel. Our paper contributes to the ongoing debate on the dual paradox of TMC's role (gatekeeper v. facilitator) and has policy implications.

Keywords: Top management counsel; Stock liquidity; Information asymmetry; Risk management; Sarbanes–Oxley act of 2002 (SOX) (search for similar items in EconPapers)
JEL-codes: G14 G30 M51 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:52:y:2022:i:c:s1044028322000114

DOI: 10.1016/j.gfj.2022.100709

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