The impact of ownership concentration and analyst coverage on market liquidity: Comparative evidence from an auction and a specialist market

This paper examines the relationships among market liquidity, ownership structure and public information production in Italy, where the share market setting might have a considerable effect. Our findings suggest that both the private information held by the largest blockholder and the public information provided by financial analysts have an impact on market liquidity. The percentage of shares owned by the controlling shareholder harms market liquidity, whereas analyst coverage improves it. The study demonstrates that the results differ with the stock market setting. We find that the effects of these two key variables are significantly lower in a specialist market than in a non-specialist market. These results emphasize the importance of distinguishing between auction and specialist market structures when studying the impact of corporate governance and analyst coverage on market liquidity. Notably, the study demonstrates that the sign and the intensity of the effect of analyst coverage on market liquidity changes according to the varying levels of ownership concentration, suggesting that private information and public information may act as complements.