The Puzzle of Blockholder Shareholdings and Stock Market Liquidity: Evidence from Malaysia

Abstract

This study examines whether insider and outsider blockholder shareholdings affect firms’ stock market liquidity. The study utilises 2,020 yearly firm observations of Malaysian firms over the period of 2009-2012. The findings indicate that insider blockholders hamper the stock market liquidity while the outsider blockholders enhance the stock market liquidity. Furthermore, the results show that institutional blockholders are perceived as monitoring bodies as their existence is strengthening the stock market liquidity. However, if the outsider blockholders are individuals, the association is not supported.  This study contributes to the literature by providing empirical evidence from an ownership concentrated equity market, namely Bursa Malaysia. This study offers implications for regulators, traders, and firms.