Board effectiveness and firm value: A mediating role of stock liquidity

Ramiz U.R. Rehman; Muhammad Akram Naseem; Mudassar Hasan; Muhammad Ishfaq Ahmad; Ender Demir

doi:10.1142/S0217590823500261

Board effectiveness and firm value: A mediating role of stock liquidity

Ramiz U.R. Rehman
, Muhammad Akram Naseem
, Mudassar Hasan
, Muhammad Ishfaq Ahmad
, Ender Demir

Research output: Contribution to journal › Article › peer-review

Abstract

We test whether an effective board affects firm value (FV) in Pakistan and whether stock liquidity (LIQ) mediates this relationship. To test this conjecture, we introduce an effective board index (EBI) using board size, board independence, board diversity and CEO duality. By employing the fixed effect model, we find that an effective board reduces agency costs and thus increases FV. An effective board may signal investors positively regarding reduced information asymmetry, thereby increasing stock LIQ. Furthermore, stock LIQ partially mediates the relationship between the effective board and FV. However, only Amihud illiquidity mediates this relationship, which suggests the stock liquidity's estimation matters.

Original language	English
Journal	Singapore Economic Review
DOIs	https://doi.org/10.1142/S0217590823500261
Publication status	Published - 13 Jun 2023

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© 2023 World Scientific Publishing Company.

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title = "Board effectiveness and firm value: A mediating role of stock liquidity",

abstract = "We test whether an effective board affects firm value (FV) in Pakistan and whether stock liquidity (LIQ) mediates this relationship. To test this conjecture, we introduce an effective board index (EBI) using board size, board independence, board diversity and CEO duality. By employing the fixed effect model, we find that an effective board reduces agency costs and thus increases FV. An effective board may signal investors positively regarding reduced information asymmetry, thereby increasing stock LIQ. Furthermore, stock LIQ partially mediates the relationship between the effective board and FV. However, only Amihud illiquidity mediates this relationship, which suggests the stock liquidity's estimation matters.",

author = "Rehman, \{Ramiz U.R.\} and Naseem, \{Muhammad Akram\} and Mudassar Hasan and Ahmad, \{Muhammad Ishfaq\} and Ender Demir",

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T2 - A mediating role of stock liquidity

AU - Rehman, Ramiz U.R.

AU - Naseem, Muhammad Akram

AU - Hasan, Mudassar

AU - Ahmad, Muhammad Ishfaq

AU - Demir, Ender

PY - 2023/6/13

Y1 - 2023/6/13

N2 - We test whether an effective board affects firm value (FV) in Pakistan and whether stock liquidity (LIQ) mediates this relationship. To test this conjecture, we introduce an effective board index (EBI) using board size, board independence, board diversity and CEO duality. By employing the fixed effect model, we find that an effective board reduces agency costs and thus increases FV. An effective board may signal investors positively regarding reduced information asymmetry, thereby increasing stock LIQ. Furthermore, stock LIQ partially mediates the relationship between the effective board and FV. However, only Amihud illiquidity mediates this relationship, which suggests the stock liquidity's estimation matters.

AB - We test whether an effective board affects firm value (FV) in Pakistan and whether stock liquidity (LIQ) mediates this relationship. To test this conjecture, we introduce an effective board index (EBI) using board size, board independence, board diversity and CEO duality. By employing the fixed effect model, we find that an effective board reduces agency costs and thus increases FV. An effective board may signal investors positively regarding reduced information asymmetry, thereby increasing stock LIQ. Furthermore, stock LIQ partially mediates the relationship between the effective board and FV. However, only Amihud illiquidity mediates this relationship, which suggests the stock liquidity's estimation matters.

UR - https://www.scopus.com/pages/publications/85163156441

U2 - 10.1142/S0217590823500261

DO - 10.1142/S0217590823500261

M3 - Article

AN - SCOPUS:85163156441

SN - 0217-5908

JO - Singapore Economic Review

JF - Singapore Economic Review

ER -

Board effectiveness and firm value: A mediating role of stock liquidity

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