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Reviewing the Relationship between Institutional Ownership and Outside Members of Board of Directors, and Liquidity of Common Stocks of Companies Quoted in Tehran Stock Exchange

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  • Esmaeel Farzaneh Kargar
  • Eesa Zarei

Abstract

Since some investors may need their investing financial sources immediately, in every financial market, the level of assets liquidity is considered as a basic issue in investment. By considering the effect of liquidity in discovering the assets` prices, distributing the financial risk, decreasing the costs of transactions, and determining the factors which affect it, is very important. This research reviews the effect of outside members of board of directors and institutional ownership, as the most important criteria of corporate governance, on liquidity of stocks. To do so, a number of 69 companies were chosen from Tehran stock exchange through screening method, in 2008-2011 time periods. In this research 7 different standards were defined for liquidity. We reached to evidences that show the number of outside members of board of directors has no effect on liquidity and institutional ownership is not that effective on liquidity. The results indicate that, since among 7 standards of liquidity, 4 standards have a negative and significant relationship with institutional ownership, we can say that: there is a negative and significant relationship between institutional ownership and liquidity of stocks.

Suggested Citation

  • Esmaeel Farzaneh Kargar & Eesa Zarei, 2014. "Reviewing the Relationship between Institutional Ownership and Outside Members of Board of Directors, and Liquidity of Common Stocks of Companies Quoted in Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 218-231, April.
    • Handle: RePEc:hur:ijaraf:v:4:y:2014:i:2:p:218-231
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    References listed on IDEAS

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    1. Rubin, Amir, 2007. "Ownership level, ownership concentration and liquidity," Journal of Financial Markets, Elsevier, vol. 10(3), pages 219-248, August.
    2. Chung, Huimin & Sheu, Her-Jiun & Wang, Juo-Lien, 2009. "Do firms' earnings management practices affect their equity liquidity?," Finance Research Letters, Elsevier, vol. 6(3), pages 152-158, September.
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