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Government ownership and stock liquidity: Evidence from China

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  • Ding, Mingfa
  • Suardi, Sandy

Abstract

This paper documents that state ownership is associated with higher stock liquidity, a finding consistent with lower investor risk perception of firms that benefit from state ownership, like preferential financing and implicit government guarantees. The effect is found to be stronger when government ownership confers stronger benefits like firms with state controlling rather than non-controlling shareholders, and when the benefits of government ownership are important – for smaller firms, for financially constrained firms, and especially during the financial crisis period. These results suggest that investors perceive government ownership as value-enhancing, which increases their willingness to trade in such stocks.

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  • Ding, Mingfa & Suardi, Sandy, 2019. "Government ownership and stock liquidity: Evidence from China," Emerging Markets Review, Elsevier, vol. 40(C), pages 1-1.
    • Handle: RePEc:eee:ememar:v:40:y:2019:i:c:7
    DOI: 10.1016/j.ememar.2019.100625
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    4. Ding, Mingfa & Shen, Mi & Suardi, Sandy, 2022. "Blockholders, tradability and information asymmetry: Evidence from Chinese listed firms," Research in International Business and Finance, Elsevier, vol. 60(C).
    5. Wang, Shujing & Yan, Hongjun & Zhong, Ninghua & Tang, Yizhou, 2024. "Indirect effects of trading restrictions," Journal of Corporate Finance, Elsevier, vol. 86(C).
    6. Boubakri, Narjess & Chen, Ruiyuan (Ryan) & El Ghoul, Sadok & Guedhami, Omrane & Nash, Robert, 2020. "State ownership and stock liquidity: Evidence from privatization," Journal of Corporate Finance, Elsevier, vol. 65(C).
    7. Ding, Mingfa & He, Zhongda & Jia, Yuecheng & Shen, Mi, 2021. "State ownership, implicit government guarantees, and crash risk: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 65(C).
    8. Mingfa Ding & Birger Nilsson & Sandy Suardi, 2017. "Foreign Institutional Investment, Ownership, and Liquidity: Real and Informational Frictions," The Financial Review, Eastern Finance Association, vol. 52(1), pages 101-144, February.
    9. Zhaohui Zhu & Gang Liu, 2024. "Fostering Enterprise Green Innovation: an Empirical Analysis of China’s Energy Use Rights Trading System," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 11581-11603, September.

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    More about this item

    Keywords

    State controlling shareholder; Stock liquidity; Information asymmetries; Trading activity;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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