Firm size, ownership structure, and systematic liquidity risk : the case of an emerging market
Author
Şensoy, Ahmet
Date
2017Source Title
Journal of Financial Stability
Print ISSN
1572-3089
Publisher
Elsevier B.V.
Volume
31
Pages
62 - 80
Language
English
Type
ArticleItem Usage Stats
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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.
Keywords
Commonality in liquidityFirm size
Order book
Ownership structure
Systematic liquidity risk