Corporate governance and equity liquidity: Analysis of S&P transparency and disclosure rankings

Wei Peng Chen, Huimin Chung, Chengfew Lee, Wei Li Liao

Research output: Contribution to journalArticlepeer-review

61 Scopus citations


This paper sets out to investigate the effects of disclosure, and other corporate governance mechanisms, on equity liquidity, arguing that those companies adopting poor information transparency and disclosure practices will experience serious information asymmetry. Since poor corporate governance leads to greater information asymmetry, liquidity providers will incur relatively higher adverse information risks and will therefore offer higher information asymmetry components in their effective bid-ask spreads. The Transparency and Disclosure (T&D) rankings of the individual stocks on the S&P 500 index are employed to examine whether firms with greater T&D rankings have lower information asymmetry components and lower stock spreads. Our results reveal that the economic costs of equity liquidity, i.e. the effective spread and the quoted half-spread, are greater for those companies with poor information transparency and disclosure practices.

Original languageEnglish (US)
Pages (from-to)644-660
Number of pages17
JournalCorporate Governance: An International Review
Issue number4
StatePublished - Jul 2007

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation


  • Asymmetric information costs
  • Corporate governance
  • Liquidity
  • Transparency and disclosure


Dive into the research topics of 'Corporate governance and equity liquidity: Analysis of S&P transparency and disclosure rankings'. Together they form a unique fingerprint.

Cite this