Influence of Corporate Governance on Stock Liquidity for Firms Listed In the Nairobi Securities Exchange

Author(s)

Mercy Lustina Angweye , Dr. Julius Miroga ,

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Volume 7 - October 2018 (10)

Abstract

The main purpose of the paper was to examine the influence of corporate governance on the stock liquidity of firms listed at the Nairobi Securities Exchange. Specifically, the influence of ownership structure on stock liquidity and the influence of audit committee structure on stock liquidity. The study was informed by Agency, Stewardship, and Resource Dependence Theories. This study used a combination of explanatory and longitudinal research design. The target population comprised 67 firms listed in Nairobi stock exchange Nairobi Securities Exchange. The data collection instruments used were structured questionnaire for primary data and content/document analysis guide, which were purposively administered to 67 company secretaries of firms listed at the NSE. Both descriptive and inferential statistics were used to analyze data. Inferential statistics are closely tied to the logic of hypothesis testing discussed. Multiple regressions were used to assess the association between corporate governance and stock liquidity. The results showed that ownership structure has a positive influence on stock liquidity (β1 = 0.368, ρ<0.05), audit committee structure had significant positive affect stock liquidity (β2 = 0.222, ρ <0.05) It is therefore recommended for regulators to improve the quality and enforcement of legal laws that protect minority shareholders from adverse actions of the controlling shareholders. Additionally, the audit committee needs to be aware of the interests of the investing public and be familiar with basic accounting principles. Finally, it is recommended that listed firms at NSE should disclose more information and have appropriate corporate disclosure policies and procedures. 

Keywords

Corporate Governance, Stock Liquidity

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