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More shareholders, higher liquidity? Evidence from an emerging stock market

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  • Chia, Yee-Ee
  • Lim, Kian-Ping
  • Goh, Kim-Leng

Abstract

Using data assembled from all non-financial firms traded on the Malaysian stock exchange, we provide evidence of a nonlinear relationship between the number of shareholders and liquidity. While more shareholders are associated with higher liquidity, the negative effect of wider spreads kicks in when shareholder base exceeds a threshold level due to higher volatility induced by noise trading. However, the threshold level is considerably higher than the number of shareholders of most Malaysian public listed firms, suggesting much room for shareholder expansion in the local market. Our findings call for corporate managers to actively manage and expand their shareholder bases.

Suggested Citation

  • Chia, Yee-Ee & Lim, Kian-Ping & Goh, Kim-Leng, 2020. "More shareholders, higher liquidity? Evidence from an emerging stock market," Emerging Markets Review, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:ememar:v:44:y:2020:i:c:s1566014118305016
    DOI: 10.1016/j.ememar.2020.100696
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    6. Craig W. Holden & Stacey Jacobsen & Avanidhar Subrahmanyam, 2014. "The Empirical Analysis of Liquidity," Foundations and Trends(R) in Finance, now publishers, vol. 8(4), pages 263-365, December.
    7. repec:hur:ijaraf:v:4:y:2014:i:2:p:62-75 is not listed on IDEAS
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    More about this item

    Keywords

    Shareholder base; Stock liquidity; Ownership dispersion; PIN; Nonlinearity; Malaysia;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

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