The nexus of top management structure, stock liquidity and valuation: a puzzle of the Gordian knot

Yankuo Qiao ()
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Yankuo Qiao: The George B. Delaplaine Jr. School of Business

Journal of Economics and Finance, 2025, vol. 49, issue 3, No 7, 822-853

Abstract: Abstract Building upon the theories of internal governance and strategic information transmission, the paper strives to examine the relationship between stock liquidity and the degree to which CEOs share executive power and responsibilities with their subordinates. It is found that stock liquidity increases accordingly when the CEO takes the total control or fully delegates to her subordinates, namely when the degree of delegation approaches the two informationally efficient regimes, delegation or centralization. In addition, the regression-based mediating analysis suggests that the liquidity effect driven by the variation of delegation structure is not actively incorporated in stock prices. Accordingly, the portfolio tests demonstrate a strong predictive power of delegation structure for abnormal stock returns. The findings of the study contribute to disentangling the Gordon knot puzzle of top management structure, stock liquidity and firm valuation.

Keywords: Delegation structure; Information environment; Stock liquidity; Firm valuation (search for similar items in EconPapers)
JEL-codes: G12 G14 G32 M12 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s12197-025-09721-1

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