Adverse Selection and Corporate Governance

Adverse Selection and Corporate Governance

This paper examines the impact of corporate governance on the adverse selection component of the bid-ask spread of stocks listed on the Singapore Exchange. These companies have been identified by Credit Lyonnais Securities Asia (CSLA) with the highest level of corporate governance among 25 emerging...

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Bibliographic Details
Main Authors: Charoenwong, Charlie, DING, David K., Siraprapasiri, Vasan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2011
Subjects:
Corporate governance
Adverse selection
GLCs
Asian Studies
Finance and Financial Management
Portfolio and Security Analysis
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/3596
https://ink.library.smu.edu.sg/context/lkcsb_research/article/4595/viewcontent/Adverse_selection_and_corporate_governance_av.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:This paper examines the impact of corporate governance on the adverse selection component of the bid-ask spread of stocks listed on the Singapore Exchange. These companies have been identified by Credit Lyonnais Securities Asia (CSLA) with the highest level of corporate governance among 25 emerging markets. We measure corporate governance by several criteria: discipline, transparency, independence, accountability, responsibilities, fairness, and social awareness. The results show that corporate governance has an inverse relationship with adverse selection. However, only the transparency dimension exhibits a significant inverse relationship with adverse selection. In addition, Government-Linked Companies (GLCs) are shown to have a smaller adverse selection component than non-GLCs.

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