Government ownership and stock liquidity: Evidence from China |
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| Affiliation: | 1. Chinese Academy of Finance and Development, Central University of Finance and Economics, PR China;2. School of Accounting, Economics and Finance, University of Wollongong, Australia;1. IESEG School of Management and LEM, France;2. Business School of Hunan University, China;3. University of Antwerp and Antwerp Management School, Belgium;4. Huazhong University of Science and Technology, China;1. Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Taipa, Macau;2. Trulaske College of Business, University of Missouri, Columbia, MO, USA;1. Economic Research Institute, The Bank of Korea, 39 Namdaemun-ro, Jung-gu, Seoul 04531, Republic of Korea;2. College of Economics, Sungkyunkwan University, 25-2, Sungkyunkwan-ro, Jongno-gu, Seoul 03063, Republic of Korea |
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| Abstract: | This paper documents that state ownership is associated with higher stock liquidity, a finding consistent with lower investor risk perception of firms that benefit from state ownership, like preferential financing and implicit government guarantees. The effect is found to be stronger when government ownership confers stronger benefits like firms with state controlling rather than non-controlling shareholders, and when the benefits of government ownership are important – for smaller firms, for financially constrained firms, and especially during the financial crisis period. These results suggest that investors perceive government ownership as value-enhancing, which increases their willingness to trade in such stocks. |
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