Corporate Governance and Corporate Bond Liquidity. Issue 2 (2nd April 2016)

• Record Type: Journal Article
• Authors: Lee, Hyun Jin; Cho, Insook
• Is Part Of: Global economic review. Volume 45:Issue 2(2016)
• Page Start: 189
• Page End: 205
• Publication Date: 2016-04-02
• Subjects: Corporate bond -- trading volume -- corporate governance; International economic relations -- Periodicals; Economic history -- 1990- -- Periodicals; East and West -- Periodicals; 337.05
• DOI: 10.1080/1226508X.2015.1137483
• Languages: English
• ISSNs: 1226-508X

Abstract

Abstract: Using a unique dataset of corporate bond trading information and corporate governance evaluation scores, this study examines the determinants of corporate bond market liquidity in Korea. In particular, this study explores whether corporate governance performance of a company influences liquidity of bonds issued by the company. The paper reports three important findings. First, the issue size and age of bond are important determinants of bond liquidity. Second, liquidity of corporate bonds is influenced by changes in macroeconomic conditions. Third, and most importantly, better corporate governance increases liquidity of corporate bonds. This result suggests that corporate governance is an important determinant of bond liquidity, as it lowers transaction costs by improving transparency and reducing asymmetry of information. This paper contributes to the literature by providing new evidence that corporate governance performance is an important determinant of liquidity in corporate bond markets.