The Relationship between Some Corporate Governance Instruments and Bid-Ask Spread in Iran

Abstract

Corporate Governance is an important effective factor in determining bid-ask spread. Bid-ask spread has important role in stock liquidity. Increasing in corporate governance quality leads to decrease bid-ask spread and therefore increase stock liquidity. The main goal of this paper is to review the relationship between corporate governance and stock liquidity in Tehran Stock Exchange. Therefore 111 firms that their required data was available were selected. Firms' governance measures include of percentage of outside directors and percentage of institutional investors data for a 5 years period (1381-1385) were selected and entered the models as independent variable. Bid-ask spread data is gathered as dependent variable. The multivariate regression model is used to examine the hypotheses. Signification of the model is examined by t and F statistics. The conclusions indicate that there is no significant relationship between Corporate Governance measures and Bid-Ask Spread in Tehran Stock Exchange.

Keywords

• corporate governance
• stock liquidity
• bid-ask spread
• information asymmetry