The effects of stock liquidity on firm value and corporate governance: Endogeneity and the REIT experiment
نویسندگان
چکیده
Article history: Received 10 October 2014 Received in revised form 2 September 2015 Accepted 3 September 2015 Available online 8 September 2015 This study examines the effects of stock liquidity on firm value and corporate governance using the Real Estate Investment Trust (REIT) setting. The unique features of the REIT industry, including homogeneity of the investment structures, the high payout requirement, and the importance of institutional investors, highlight the positive effect of stock liquidity on firm value through corporate governance. To address the endogeneity problem,we perform a difference-in-differences test based on the propensity scorematching estimator. The result shows that REIT stock liquidity has a causal and positive effect onfirmvalue, asmeasuredby Tobin's Q. Importantly, REIT stock liquidity is conducive to better corporate governance through the channel of institutional ownership. REIT stock liquidity leads to higher institutional ownership, particularly for institutional investor types that are active monitors and institutional investors with multi-firm ownership in their REIT portfolios. © 2015 Elsevier B.V. All rights reserved. JEL classification: C31 G12 G23 G30 G34 G39
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