The Role of Ownership Structure and Board Characteristics in Stock Market Liquidity: Evidence from the Tehran Stock Exchange
Keywords:
Ownership Structure, Ownership Concentration, Board Characteristics, Board Financial Knowledge, Stock Market LiquidityAbstract
Abstract: The purpose of this study was to investigate the role of ownership structure and board characteristics in stock market liquidity among firms listed on the Tehran Stock Exchange during the period 2014–2024. This study was an applied quantitative research with a descriptive-correlational design. The statistical population consisted of all companies listed on the Tehran Stock Exchange from 2014 to 2024. Using systematic screening criteria, 109 companies were selected as the final sample, resulting in 1,199 firm-year observations. Stock market liquidity was measured using the share turnover ratio. Ownership structure was operationalized through institutional ownership, managerial ownership, ownership concentration, and government ownership. Board characteristics included board size, board independence, and board financial knowledge. Firm size, financial leverage, and return on assets were incorporated as control variables. Data were collected from audited financial statements, annual reports, the Codal system, and Rahavard Novin databases. Descriptive statistics, panel unit root tests, F-Limer tests, Hausman tests, and panel data regression models were employed using EViews software to test the research hypotheses. The results indicated that institutional ownership had a significant negative effect on stock market liquidity (β = −0.0218, p < 0.001), while managerial ownership had a significant positive effect (β = 0.0026, p = 0.0045). Ownership concentration was negatively associated with stock market liquidity (β = −0.0041, p = 0.0169), whereas government ownership showed no statistically significant relationship (p = 0.6094). Regarding board characteristics, board size exhibited a significant negative effect on stock market liquidity (β = −0.1438, p = 0.0272), and board financial knowledge also demonstrated a significant negative relationship (β = −0.0872, p < 0.001). Board independence did not significantly affect stock market liquidity (p = 0.5068). The ownership structure model explained 67.1% of the variation in stock market liquidity, while the board characteristics model explained 31.4%. The findings demonstrate that ownership structure and board characteristics play important roles in shaping stock market liquidity; however, ownership-related governance mechanisms exert a stronger influence than board-related mechanisms. Institutional ownership and ownership concentration reduce liquidity, whereas managerial ownership enhances it. Among board characteristics, larger boards and higher levels of board financial expertise are associated with lower liquidity, while board independence appears unrelated to liquidity.
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