Influence of Corporate Governance on Stock Liquidity for Firms Listed In the Nairobi Securities Exchange
Author(s)
Mercy Lustina Angweye , Dr. Julius Miroga ,
Download Full PDF Pages: 01-10 | Views: 1212 | Downloads: 266 | DOI: 10.5281/zenodo.3456002
Abstract
The main purpose of the paper was to examine the influence of corporate governance on the stock liquidity of firms listed at the Nairobi Securities Exchange. Specifically, the influence of ownership structure on stock liquidity and the influence of audit committee structure on stock liquidity. The study was informed by Agency, Stewardship, and Resource Dependence Theories. This study used a combination of explanatory and longitudinal research design. The target population comprised 67 firms listed in Nairobi stock exchange Nairobi Securities Exchange. The data collection instruments used were structured questionnaire for primary data and content/document analysis guide, which were purposively administered to 67 company secretaries of firms listed at the NSE. Both descriptive and inferential statistics were used to analyze data. Inferential statistics are closely tied to the logic of hypothesis testing discussed. Multiple regressions were used to assess the association between corporate governance and stock liquidity. The results showed that ownership structure has a positive influence on stock liquidity (β1 = 0.368, ρ<0.05), audit committee structure had significant positive affect stock liquidity (β2 = 0.222, ρ <0.05) It is therefore recommended for regulators to improve the quality and enforcement of legal laws that protect minority shareholders from adverse actions of the controlling shareholders. Additionally, the audit committee needs to be aware of the interests of the investing public and be familiar with basic accounting principles. Finally, it is recommended that listed firms at NSE should disclose more information and have appropriate corporate disclosure policies and procedures.
Keywords
Corporate Governance, Stock Liquidity
References
i. Ajina, A., Lakhal, F. (2010). “Ownership Structure and Stock Market Liquidity in France.”Bankers, Markets & Investors, no104, pp. 43-52.
ii. Ajina, A., Lakhal, F., & Sougne, D. (2015). Institutional investors, information asymmetry and stock market liquidity in France. International Journal of Managerial Finance, 11(1), 44-59.
iii. Al-Thuneibat, A 2006, Audit in the light of the international auditing standards and
iv. Amihud, Y., & Mendelson, H. (2006). Asset pricing and the bid-ask spread. Journal of Financial Economics, 17(2), 223-249. https://doi.org/10.1016/0304-405X (86)90065-6
v. Amihud, Y., Mendelson, H., & Wood, R. A. (2012). Liquidity and the 1987 stock market crash. Journal of Portfolio Management, 16(3), 65-69. https://doi.org/10.3905/jpm.1990.409268
vi. Arens, AA, Elder, RJ & Beasley, MS (2009), Auditing and Assurance Services: An
vii. Baxter, P & Cotter, J 2009, ‘Audit committees and earnings quality’, Accounting and
viii. Brogaard, J., et al. (2017). "Stock liquidity and default risk." Journal of Financial Economics 124(3): 486-502.
ix. Cao, C., &Petrasek, L. (2014).Liquidity risk and institutional ownership. Journal of Financial Markets, 21, 76-97.
x. Chrisman, J. J., J. H. Chua and R. A. Litz (2004).Comparing the Agency Costs of Family and Non-Family Firms: Conceptual Issues and Exploratory Evidence. Entrepreneurship Theory and Practice 28 (4): 335-354
xi. Chung, K. H., Elder, J., & Kim, J. C. (2010).Corporate governance and liquidity. Retrieved from https://www.researchgate.net/profile/Kee_Chung/publication/228301788_Corporate_Governance_and_Liquidity/links/0fcfd50b62866c95e5000000.pdf. https://doi.org/10.1017/S0022109010000104
a. Corporation Journal of Financial Economics. 65. 365-395. 10.1016/S0304-405X (02)00146-0.
xii. Edmans, A., Fang, V. W., &Zur, E. (2013).The effect of liquidity on governance. Review of Financial studies, 26(6), 1443–1482. https://doi.org/10.1093/rfs/hht012
xiii. Elshandidy, T., &Neri, L. (2015). Corporate governance, risk disclosure practices, and market liquidity: comparative evidence from the UK and Italy. Corporate Governance: An International Review, 23(4), 331-356. https://doi.org/10.1111/corg.12095
a. Equity Prices. Quarterly Journal of Economics, Vol. 118, No. 1, pp. 107-155, February 2003. Available at SSRN: https://ssrn.com/abstract=278920 or http://dx.doi.org/10.2139/ssrn.278920
xiv. Faccio, Mara & Lang, H. (2002). The Ultimate Ownership of Western European
a. Finance, vol. 49, no. 1, pp. 267-290. http://dx.doi.org/10.1111/j.1467629X.2008.00290.x
xv. Gompers, Paul A. and Ishii, Joy L. and Metrick, Andrew, Corporate Governance and
xvi. Hassan, S. U., & Ahmed, A. (2012). Corporate governance, earnings management and financial performance: a case of Nigerian manufacturing firms. American International Journal of Contemporary Research, 2(7), 214-226
xvii. Hsu, G. C. M., &Koh, P. S. (2005). Does the presence of institutional investors influence accruals management? Evidence from Australia. Corporate Governance: An International Review, 13(6), 809–823
a. Integrated Approach, 13th Edition, New Jersey: Prentice Hall
xviii. Jensen, M. and Meckling, W. (1976), “The theory of the firm: managerial behavior, agency costs, and ownership structure”, Journal of Financial Economics, Vol. 3 No. 4, pp. 305‐60.
xix. Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48(3), 831-880
xx. Kajola, S. (2008). Corporate Governance and Firm Performance: The Case of Nigerian
xxi. Karmani, M., Ajina, A., &Boussaada, R. (2015). An investigation of the relation between corporate governance and liquidity: Empirical evidence from France. Journal of Applied Business Research, 31(2), 631-646. https://doi.org/10.19030/jabr.v31i2.9118
xxii. Koech, P. (2012). Relationship Between Liquidity And Return Of Stock At. 34-35.
xxiii. Lipson, M.L. and Mortal, S. (2009), Liquidity and capital structure. Journal of Financial Markets 12 (4), 611-644
a. Listed Firms. European Journal of Economics, Finance and Administrative Sciences. 14.
xxiv. Loukil, N., &Yousfi, O. (2015). Does corporate governance affect stock liquidity in the Tunisian Stock Market? Retrieved from https://mpra.ub.Uni muenchen.de/28697/1/MPRA_paper_28697.pdf
a. Regulations and local laws: the theory and application, first edition, Amman, Jordan University publications.
xxv. Sakwa, M. B. (2015). The Effect Of Corporate Governance Practices On. 27-29.
xxvi. Sawick, J. (2009). Corporate governance and dividend policy in Southeast Asia pre- and Post- Crisis. The European Journal of Finance 15(2), 211-230
xxvii. Shah A, S. Z. (2009). Corporate governance and financial performance: A comparative study of developing and developed markets (Doctoral dissertation, Muhammad Ali Jinnah University, Kartachi).
xxviii. Shi, X., Dempsey, M., Duong, H. N., &Kalev, P. S. (2015). Investor protection and market liquidity revisited. Corporate Governance, 15(4), 517-529. https://doi.org/10.1108/CG-04-2014-0046
xxix. Shleifer, A. &Vishny, R. (1997).A survey of corporate governance. Journal of Finance, 52(2), 737-783
xxx. Switzer, L. N., & Picard, A. (2016). Stock market liquidity and economic cycles: A non-linear approach. Economic Modelling, 57, 106-119.doi:10.1016/j.econmod.2016.04.006
xxxi. Udomsirikul, Prasit. Seksak, Jumreornvong, and Pornsit, JJiraporn. 2011. Liquidity and Capital Structure: Evidence from a Bank-dominated Economy. Working Paper, Social Science Research Network.
xxxii. Wamugo, Mwangi, Makau, Muathe Stephen, and Kosimbei, George (2014) “Relationship between Capital Structure and Performance of Non-Financial Companies Listed In the Nairobi Securities Exchange, Kenya”. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics, Vol: 1 Issue 2.
xxxiii. Yosra, G., &Sioud, O. (2011). Ultimate ownership structure and stock liquidity: Empirical evidence from Tunisia. Studies in Economics and Finance, 28(4), 282-300. https://doi.org/10.1108/10867371111171546
Cite this Article: