Block Shareholders and Stock Liquidity in the Indian Stock Market: Lack of Trading or Information Asymmetry?

Abstract

We study the effect of block shareholding on stock liquidity using panel models for 128 stocks from the period 2011 to 2014. After controlling for the size of the firm, ownership concentration is found to have a small statistically significant negative effect on liquidity. Ownership structure models indicate that block shareholding by Government has a negative effect on liquidity. However, we do not find any statistically significant effects due to block shareholding by individuals and families or foreign or domestic institutions. Lower turnovers of state owned companies may be due to lack of trading rather than information asymmetry or signalling effects.