SSA_Liquidity_Constructs_BH_21-Feb-2013.doc (652 kB)
Firm level governance and institutional determinants of liquidity: evidence from Sub Saharan Africa
journal contribution
posted on 2023-06-08, 14:30 authored by Bruce Hearn, Jenifer PiesseThis study contrasts well established liquidity measures, namely volume-based turnover ratio, related price-impact Amihud (2002) construct and the multidimensional Liu (2006) indicator alongside the Lesmond, Ogden and Trzcinka (1999) proportion of zero daily returns metric in explaining bid-ask spread plus commissions costs. We control for six critical firm governance characteristics that impact liquidity alongside the market-based controls that are conventionally solely included in the literature. Using a unique sample of 12 Sub Saharan African (SSA) equity markets, namely Kenya, Mauritius, Zambia, Zimbabwe, Botswana, Malawi, Namibia, Nigeria, Ghana, BRVM (Cote d’Ivoire), and then South Africa’s ALT-x and Main boards we find evidence that state and foreign venture capitalist involvement in firms enhances liquidity while involvement of foreign partners, entrepreneurial founders, domestic venture capital and inclusion within an extended business or family network has opposite effect. The evidence supports the use of the proportion of daily zero returns measure in preference to other measures in capturing illiquidity. Furthermore we find that liquidity is closely associated with three of six World Bank Governance measures of institutional quality with these being government effectiveness, regulatory quality and rule of law
History
Publication status
- Published
File Version
- Accepted version
Journal
International Review of Financial AnalysisISSN
1057-5219Publisher
ElsevierExternal DOI
Volume
28Page range
93-111Department affiliated with
- Business and Management Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2013-03-18First Open Access (FOA) Date
2013-03-18First Compliant Deposit (FCD) Date
2013-02-21Usage metrics
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