CORPORATE GOVERNANCE AND STOCK LIQUIDITY: A STUDY OF KSE 100 INDEX MANUFACTURING FIRMS

Abstract

Purpose To analyze the relationship between corporate governance measures and stock liquidity by taking 29 manufacturing companies of Pakistan. All the companies which are part of our research data are listed among KSE 100 index. Methodology & Design This research is based on a qualitative approach which involves a set of numeric data of all the listed 29 manufacturing companies. We find that better-governed firms have a lower trading cost, smaller price impacts oftrade, and higher trading speed. Moreover, the empirical results reveal that corporate governance quality improves stock liquidity because it is associated with higher information disclosure Findings After analyzing financial and governance data of 29 listed manufacturing companies of KSE 100. We find that if companies wanted their stock liquidity better they need to strengthen their corporate governance aspects. The regression analysis shows that ownership of financial institutions, foreign shareholders and government ownership in a firm is significantly associated with the stock liquidity. Whereas, board size and board independence not significantly related to stock liquidity. Limitations are Due to data limitation and measures ofCG available in firm’s report we restricted with representative sample of PSX using KSE 100 index manufacturing firms only. This limitation is while collecting data set of Pakistani companies we face is many companies did not update their data correctly there are variations noticed in many websites and some ofthe companies hide their financial data which cause many problems in the way ofresearch and also this data is large. Also, the time ofthe study is from 2016 till 2020. Recommendations For improving all the aspects of financial data in all companies it is recommended to structure and improve their decision-making them to work on their corporate governance power to reduce the financial loss.