Fiduciary or loyalty? Evidence from top management counsel and stock liquidity

Document Type

Journal Article

Publication Title

Global Finance Journal

Volume

52

Publisher

Elsevier

School

School of Business and Law

RAS ID

40636

Comments

Michael, M., Ali, M. J., Atawnah, N., & Muniandy, B. (2022). Fiduciary or loyalty? Evidence from top management counsel and stock liquidity. Global Finance Journal, 52, 100709.

https://doi.org/10.1016/j.gfj.2022.100709

Abstract

We examine whether and how corporate top management counsel (TMC) influences stock liquidity and document a significant positive association. Our results remained robust to a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. We identify a reduction in information asymmetry and business risk as the channel through which TMC affects stock liquidity. Further tests reveal that the positive relationship is stronger when the CEO has no legal expertise and in the post-SOX period, where firms are mandated to have in-house counsel. Our paper contributes to the ongoing debate on the dual paradox of TMC's role (gatekeeper v. facilitator) and has policy implications.

DOI

10.1016/j.gfj.2022.100709

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