16,613 research outputs found

    Does corporate governance affect stock liquidity in the Tunisian Stock Market?

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    The aim of the current paper is to study the link between the effects of corporate governance on information asymmetry problems and stock liquidity in the Tunisian Stock Market. We use a sample of 49 Tunisian firms listed between 1998 and 2007. Our results show that corporate governance has direct and indirect effects on stock liquidity. Threat of expropriation exerted by family and foreign shareholders discourages reluctant investors,which decreases stock liquidity. In contrast, they invest their capital in State controlled firms. In fact, State is regarded as an effective controller rather than a shareholder. The State involvement in Tunisian firms is considered as state guarantee for investors, which increases stock liquidity. Our results provide evidence that some attributes of corporate governance improve stock liquidity because they reduce information asymmetry.corporate governance, shareholder identity, stock liquidity, Tunisian Stock Exchange

    IPO underpricing and after-market liquidity

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    The underpricing of the shares sold through Initial Public Offerings (IPOs) is generally explained with asymmetric information and risk. We complement these traditional explanations with a new theory. Investors who buy IPO shares are also concerned by expected liquidity and by the uncertainty about its level when shares start trading on the after-market. The less liquid shares are expected to be, and the less predictable their liquidity is, the larger will be the amount of "money left on the table" by the issuer. We present a model that integrates such liquidity concerns within a traditional framework with adverse selection and risk. The model's predictions are supported by evidence from a sample of 337 British IPOs effected between 1998 and 2000. Using various measures of liquidity, we find that expected after-market liquidity and liquidity risk are important determinants of IPO underpricing, after controlling for variables traditionally used to explain underpricing.liquidity, initial public offering, post-IPO market, after-market trading

    The Determinants Of Cross-Border Equity Flows

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    We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international transactions. Our model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. The resulting augmented 'gravity' equation has equity market capitalisation representing market size and distance proxying some informational asymmetries, as well as a variable representing openness of each economy. But other variables explicitly represent information transmission (telephone call traffic and multinational bank branches), an information asymmetry between domestic and foreign investors (degree of insider trading), and the efficiency of transactions ('financial market sophistication'). This equation accounts for almost 70% of the variance of the transaction flows. Dummy variables (adjacency, language, currency or trade bloc, and a 'major financial centre' effect) do not improve the results, nor does a variable representing destination country stock market returns. The key role of informational asymmetries is confirmed. Our information transmission variables also substantially improve standard gravity equations for trade in goods.Equity flows, cross-border portfolio investment, information asymmetries, gravity model

    The Essential Role of Securities Regulation

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    This Article posits that the essential role of securities regulation is to create a competitive market for sophisticated professional investors and analysts (information traders). The Article advances two related theses-one descriptive and the other normative. Descriptively, the Article demonstrates that securities regulation is specifically designed to facilitate and protect the work of information traders. Securities regulation may be divided into three broad categories: (i) disclosure duties; (ii) restrictions on fraud and manipulation; and (iii) restrictions on insider trading-each of which contributes to the creation of a vibrant market for information traders. Disclosure duties reduce information traders\u27 costs of searching and gathering information. Restrictions on fraud and manipulation lower information traders\u27 cost of verifying the credibility of information, and thus enhance information traders\u27 ability to make accurate predictions. Finally, restrictions on insider trading protect information traders from competition from insiders that would undermine information traders\u27 ability to recoup their investment in information. Normatively, the Article shows that information traders can best underwrite efficient and liquid capital markets, and, hence, it is this group that securities regulation should strive to protect. Our account has important implications for several policy debates. First, our account supports the system of mandatory disclosure. We show that, although market forces may provide management with an adequate incentive to disclose at the initial public offering (IPO) stage, they cannot be relied on to effect optimal disclosure thereafter. Second, our analysis categorically rejects calls to limit disclosure duties to hard information and self-dealing by management. Third, our analysis supports the use of the fraud-on-the-market presumption in all fraud cases even when markets are inefficient. Fourth, our analysis suggests that in cases involving corporate misstatements, the appropriate standard of care should, in principle, be negligence, not fraud

    The Essential Role of Securities Regulation

    Get PDF
    This Article posits that the essential role of securities regulation is to create a competitive market for sophisticated professional investors and analysts (information traders). The Article advances two related theses-one descriptive and the other normative. Descriptively, the Article demonstrates that securities regulation is specifically designed to facilitate and protect the work of information traders. Securities regulation may be divided into three broad categories: (i) disclosure duties; (ii) restrictions on fraud and manipulation; and (iii) restrictions on insider trading-each of which contributes to the creation of a vibrant market for information traders. Disclosure duties reduce information traders\u27 costs of searching and gathering information. Restrictions on fraud and manipulation lower information traders\u27 cost of verifying the credibility of information, and thus enhance information traders\u27 ability to make accurate predictions. Finally, restrictions on insider trading protect information traders from competition from insiders that would undermine information traders\u27 ability to recoup their investment in information. Normatively, the Article shows that information traders can best underwrite efficient and liquid capital markets, and, hence, it is this group that securities regulation should strive to protect. Our account has important implications for several policy debates. First, our account supports the system of mandatory disclosure. We show that, although market forces may provide management with an adequate incentive to disclose at the initial public offering (IPO) stage, they cannot be relied on to effect optimal disclosure thereafter. Second, our analysis categorically rejects calls to limit disclosure duties to hard information and self-dealing by management. Third, our analysis supports the use of the fraud-on-the-market presumption in all fraud cases even when markets are inefficient. Fourth, our analysis suggests that in cases involving corporate misstatements, the appropriate standard of care should, in principle, be negligence, not fraud

    The Determinants of Cross-Border Equity Flows: The Geography of=20 Information

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    We apply a new approach to a new panel data set on bilateral=20 gross cross-border equity flows between 14 countries, 1989- 96. The model=20 integrates elements of the finance literature on portfolio composition and= =20 the international macroeconomics and asset trade literature. Gross asset=20 flows depend on market size in both source and destination country as well= =20 as trading costs, in which both information and the transaction technology= =20 play a role. Distance proxies some information costs, and other variables=20 explicitly represent information transmission, an information asymmetry=20 between domestic and foreign investors, and the efficiency of transactions.= =20 The remarkably good results have strong implications for theories of asset= =20 trade. We find that the geography of information is the main determinant of= =20 the pattern of international transactions, while there is little support in= =20 our data for diversification and =91return-chasing=92 motives for= transactions.
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