Cultural diversity in ownership and stock liquidity

ABSTRACT

In this study, we explore the relationship between cultural diversity in ownership and stock liquidity. We manually collect foreign investors’ countries of origin data from 2003 to 2017 to measure the cultural diversity in the ownership of Chinese listed firms. Our results show that cultural diversity in ownership reduces stock liquidity, and these results are robust to endogeneity examinations. In addition, market valuation uncertainty exaggerates the effect of cultural diversity in ownership on stock liquidity.

KEYWORDS:

• Culture
• stock liquidity
• foreign investor
• cultural diversity

JEL CLASSIFICATION:

• G23
• M14

Highlights

• We manually collect foreign investors’ countries of origin data of Chinese listed firms from 2003 and 2017.

• We calculate cultural diversity in ownership and study its impact on stock liquidity.

• There is a negative association between cultural diversity in ownership and stock liquidity.

• Market valuation uncertainty exaggerates the effect of cultural diversity in ownership on stock liquidity.

Acknowledgments

We acknowledge the support of the National Natural Science Foundation of China (Nos. 71603061), the Natural Science Foundation of Guangdong Province (Nos. 2019A1515011649), National Law and Legal Theory Research Project of the Ministry of Justice 2019, “A study on the legal system of corporate dividend distribution (No.19SFB3032), the Fund Projects of Guangdong University of Foreign Studies, and the Foundation of South China Institute of Fortune Management Research.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ See, https://liuxue.ef.com.cn/epi/.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71603061].