The political institutional and firm governance determinants of liquidity: Evidence from North Africa and the Arab Spring

Bruce Hearn

Journal of International Financial Markets, Institutions and Money, 2014, vol. 31, issue C, 127-158

Abstract: This study undertakes a unique comparison into the relative efficacy of four well established liquidity measures, namely turnover, proportion of daily zero returns, Amihud (2002) and Liu (2006), in explaining the bid-ask spread plus brokerage costs when powerful and common firm governance mechanisms are taken into account as controls. These are representative of ownership of listed firms by state, long term foreign partners, entrepreneurial founders, single family entities, extended family groups and business networks, domestic and foreign venture capitalists. An additional control for firms within business network controlled by former Tunisian premier, Ben Ali, and Morocco's royal family is also included. Using a unique sample of all listed firms across the equity markets of Egypt, Morocco, Tunisia and Algeria I find evidence of equity capital rationing during the Arab Spring period of political upheaval. Less well regulated SME markets such as Morocco's marche croissance have liquidity-based transactions costs attributable to Arab Spring four times those of the marche principal while those in Egypt's Nilex are twenty times those of the prestigious EGX30 index. Finally the greatest changes in political risks associated with aggregate liquidity across the Arab Spring are democratic accountability, military in politics, and law and order.

Keywords: Liquidity; Liquidity determinants; Emerging financial markets; Africa (search for similar items in EconPapers)
JEL-codes: G15 N20 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443114000328
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:31:y:2014:i:c:p:127-158

DOI: 10.1016/j.intfin.2014.03.006

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().