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- Title
Investor Protection and Firm Liquidity.
- Authors
BROCKMAN, PAUL; CHUNG, DENNIS Y.
- Abstract
The purpose of this study is to investigate the relation between investor protection and firm liquidity. We posit that less protective environments lead to wider bid-ask spreads and thinner depths because they fail to minimize information asymmetries. The Hong Kong equity market provides a unique opportunity to compare liquidity costs across distinct investor protection environments, but still within a common trading mechanism and currency. Our empirical findings verify that firm liquidity is significantly affected by investor protection. Regression and matched-sample results show that Hong Kong-based equities exhibit narrower spreads and thicker depths than their China-based counterparts.
- Subjects
SERVICES for investors; STAKEHOLDERS; INVESTMENT guaranty insurance; LIQUIDITY (Economics); INFORMATION asymmetry; INVESTMENT management; SPREAD (Finance); RISK; SECURITIES trading; PORTFOLIO management (Investments); FINANCIAL markets; RATE of return on stocks
- Publication
Journal of Finance (Wiley-Blackwell), 2003, Vol 58, Issue 2, p921
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/1540-6261.00551