Journal of Financial Stability Vol. 31 2017
Firm size, ownership structure, and systematic liquidity risk: The case of an emerging market
Abstract
Previous studies support the hypothesis that institutional ownership leads to an enhanced systematic liquidity risk by increasing the commonality in liquidity. By using a proprietary database of all incoming orders and ownership structure in an emerging stock market, we show that institutional ownership leads to an increase in commonality in liquidity for mid- to-large cap firms; however, only individual ownership can lead to such an increase for small cap firms, revealing a new source of systematic liquidity risk for a specific group of firms. We also reveal that commonality decreases with the increasing number of investors (for both individual and institutional) at any firm size level; suggesting that as the investor base gets larger, views of market participants become more heterogeneous, which provides an alternative way to decrease the systematic liquidity risk.
- DOI
- 10.1016/j.jfs.2017.06.007
- Volume
- 31
- Pages
- 62-80
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref