Too Much Water Drowned the Miller: Exploring the Role of Managerial Ownership on Stock Liquidity in China

Absztrakt (kivonat)

This paper aims to investigate the relationship between managerial ownership and stock liquidity in the Chinese stock market, with a particular emphasis on the mediating effect of ESG disclosure, and to provide practical implications for investors, managers, and policymakers. The study is based on panel data collected from Bloomberg and CSMAR from 2011 to 2020, encompassing 12665 firm-year observations of 1325 Chinese non-financial A-share listed firms. A two-way fixed effects model is employed to examine the relationship between managerial ownership, Environmental, Social and Governance (ESG) disclosure, and stock liquidity. Mediation analysis is used to investigate the mediating effect of ESG disclosure. The findings reveal a positive association between managerial ownership and stock liquidity, with a non-linear relationship between the ratio of managerial ownership and stock liquidity. The results suggest that excessive managerial ownership may hinder stock liquidity, whereas moderate levels of managerial ownership could enhance stock liquidity. The study also identifies ESG disclosure as a mediator of the relationship between managerial ownership and stock liquidity, indicating that firms with the presence of managerial ownership are more likely to disclose ESG information, which in turn leads to higher levels of stock liquidity. Furthermore, it is found that the presence of managerial ownership is more pronounced to stock liquidity in State-Owned Enterprises (SOEs) than in non-SOEs. This study contributes to the existing literature by examining the role of managerial ownership and stock liquidity in the Chinese context, providing practical implications for stakeholders on corporate governance and regulation. It also highlights potential mechanisms for enhancing the efficiency and transparency of Chinese firms in the stock market, contributing to strategies for sustainable economic development.