Effect of Ownership, Governance, and Transparency on Liquidity - Chilean Evidence

Download or read book Effect of Ownership, Governance, and Transparency on Liquidity - Chilean Evidence written by Sakthi Mahenthrian and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.