Director holdings, shareholder concentration and illiquidity

This paper examines the relationship between stock ownership concentration and illiquidity, using comprehensive shareholding data from companies listed on the Australian Stock Exchange. Ownership concentration is positively related to illiquidity. Analysis of individual shareholder types extends our understanding of this relationship. The results indicate that low levels of inside holdings have a positive impact on liquidity, while high levels reduce liquidity. Retail shareholders have a small, but positive, impact on liquidity. Institutional shareholdings enhance turnover. However, institutional shareholdings do not alleviate information asymmetry and do not reduce spreads. JEL Classification: G3