Thian, Tze Chung (2012) Foreign ownership and the liquidity of Malaysian stocks. Masters thesis, Universiti Malaysia Sabah.
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Abstract
Using data collected for a sample of 600 firms listed on Bursa Malaysia from year 2002 to 2009, this thesis examines the relationship between foreign ownership and the liquidity of Malaysian stocks. Foreign ownership is defined as the fraction of total shares outstanding held by foreign investors, whereas stock liquidity is computed using the Amihud illiquidity ratio. The regression models control for other known determinants of stock liquidity namely analyst coverage, local individual investors, local institutions, firm size, stock returns, turnover and return volatility. All the empirical analyses compute robust standard errors, and the main findings can be summarized as follows: First, the relationship between total foreign ownership and stock liquidity is statistically significant but nonlinear. This implies that stock liquidity improves at lower levels of total foreign ownership, but the relationship turns negative after reaching a certain level of threshold. Second, the significant nonlinear relationship in total foreign ownership is found to be driven by those foreign investors who trade via nominee accounts. Lastly, the existence of the nonlinear relationship is due to the trade-off between information competition and adverse selection costs. The competition among informed foreign investors improves stock liquidity, but their participation increases adverse selection costs that impair liquidity.
| Item Type: | Thesis (Masters) |
|---|---|
| Keyword: | Foreign ownership, Stock liquidity, Bursa Malaysia, Amihud illiquidity ratio, Analyst coverage, Local individual investors, Local institutions, Firm size |
| Subjects: | H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation > HG4551-4598 Stock exchanges |
| Department: | SCHOOL > Labuan School of International Business and Finance |
| Depositing User: | DG MASNIAH AHMAD - |
| Date Deposited: | 11 Mar 2025 09:59 |
| Last Modified: | 11 Mar 2025 09:59 |
| URI: | https://eprints.ums.edu.my/id/eprint/43090 |
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