Board Interlocks and Stock Liquidity: New Evidence from an Emerging Market

ABSTRACT

This study examines the implications of board interlocks on stock liquidity using a sample of listed Brazilian firms. The instrumental variable two-stage least squares estimation is used to minimize endogeneity concerns. This study provides evidence that board interlocks are positively related to stock liquidity. Our cross-sectional study findings reveal that the impact of board interlocks on stock liquidity is more pronounced for firms with high uncertainty, in competitive industries, and with poor governance. Our findings suggest that board interlocks aid businesses in accessing external capital from potential investors.

KEYWORDS:

• Board interlocks
• Brazil
• information asymmetry
• signaling theory
• stock liquidity

JEL CLASSIFICATION:

• D85
• G10
• G14
• L14

Acknowledgments

We would like to express our sincere thanks to the editor and anonymous reviewers for their constructive comments and suggestions. We acknowledge financial support from the National Natural Science Foundation of China (Grant number: 71573159) and China International Postdoctoral Exchange Program

Disclosure Statement

The authors declare that they have no competing interests

Supplemental material

Supplemental data for this article can be accessed on the publisher’s website.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71573159]; China International Postdoctoral Exchange Program.