Title

Adverse Selection and Corporate Governance

Publication Type

Journal Article

Publication Date

6-2011

Abstract

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.

Keywords

Corporate governance, Adverse selection, GLCs

Discipline

Finance and Financial Management

Research Areas

Finance

Publication

International Review of Economics and Finance

Volume

20

Issue

3

First Page

406

Last Page

420

ISSN

1059-0560

Identifier

10.1016/j.iref.2010.11.011

Publisher

Elsevier

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