The Effect of Corporate Governance’s Implementation on 3 Dimensions of Stock Liquidity

Irma, and Hadiwidjaja, Rini Dwiyani and Hartati, Noorina and Idrus, Olivia (2015) The Effect of Corporate Governance’s Implementation on 3 Dimensions of Stock Liquidity. In: 2nd Global Conference on Business and Social Science, 17-18 September 2015, Bali.

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Abstract

It is really crucial for companies to provide a good corporate governance (GCG) that can be accessed either by inside or outside investor to avoid information asymmetry between inside investor that has better information and outside investor with little operational information. By decreasing information asymmetry that occurs between the participants of stock market, this will reduce the cost of capital that should be borne by market dealer. Moreover, it will be profitable for liquidity provider or market dealer and improve the liquidity of the company shares. More liquid a stock, it will leads to more stock volume (depth) that will be traded and smaller the spreads. This study aims to investigate the effect of GCG’s implementation on 3 dimensions of stock liquidity by using data obtained from 100 companies listed on Indonesian Stock Exchange which is include in the COMPASS 100’s financial statement in 2012 and intraday stock data to determine information regarding the implementation of GCG toward stock liquidity. The results show that audit committee and audit quality has a significant relationship with the 3 dimension of stock liquidity while board of commissioners does not significantly affect the 3 dimension of stock liquidity, ie. spread, depth and DTRS.

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