Effect of ownership, governance, and transparency on liquidity – Chilean evidence

Tom Gjerde, Sakthi Mahenthiran and David Cademartori

Journal of Contemporary Accounting and Economics, 2013, vol. 9, issue 2, 183-202

Abstract: Companies with relatively thin trading, a high concentration of insider ownership, and a privatized pension system characterize Chile’s Santiago Stock Exchange. Within this setting, we study the relationship between ownership concentration, corporate governance, and stock market liquidity. Our results suggest that board independence, corporate disclosure and outside monitoring by institutions help moderate the effects that insiders have on trading costs and liquidity. We also find that market makers with inventory reduce the informational component of trading costs. Finally, the trades of insiders provide price guidance to market makers, while traders employ a follow-the-insider strategy when transparency is low.

Keywords: Chile; Market liquidity; Ownership concentration; Voluntary disclosure; Corporate governance (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:9:y:2013:i:2:p:183-202

DOI: 10.1016/j.jcae.2013.09.003

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