Financial Management Perspective

Financial Management Perspective

Investigating the Effect of Block Trading Mechanisms on Stock Liquidity in the Listed Companies on the Tehran Stock Exchange

Document Type : Original Article

Authors
mehrab nasiry
Hossein Fakhari
Esfandiyar Malekian Kalehbasti
University of Mazandaran
10.48308/jfmp.2025.241679.1532
Abstract
Abstract

Introduction: Block trades, as a significant event in the capital market due to the large volume of transferred shares and their potential to influence price and liquidity, are consistently under the scrutiny of financial analysts. These transactions can bring implications for market efficiency and information transparency through the transfer of information and changes in corporate ownership structures. On the other hand, media coverage plays a moderating role in this process by reducing information asymmetry and increasing investor awareness. Accordingly, the present study investigates the effect of block trades on stock liquidity, emphasizing the mediating role of media coverage in the Tehran Stock Exchange (TSE).

Method: In terms of objective, the present research is categorized as applied, as the resulting findings can serve as a basis for decision-making by managers, policymakers, and capital market investors. In terms of data type and execution process, this research adopts a quantitative approach with an ex-post-facto nature. The data comprises information on all companies listed on the TSE from 2014 to 2022 (1393 to 1401 solar calendar) that have executed at least one block trade. After applying a systematic exclusion method, 100 companies with a total of 11,237 block trades were selected as the final sample. Data analysis was performed using descriptive and inferential statistics, employing the Generalized Method of Moments (GMM). The utilized tools include Rahavard Novin and Excel software for data extraction and variable calculation, and Stata for hypothesis testing and results analysis.

Results and Discussion: This study examined the effect of block trades on stock liquidity in the TSE, considering the moderating role of media coverage. The main findings indicate that block trades have a positive and significant impact on the long-term stock liquidity, contributing to increased market efficiency. This is facilitated by the exit of large volumes of shares without causing a price shock. Furthermore, media coverage plays a positive and significant moderating role in this relationship. This means that active media coverage strengthens the positive effect of block trades on liquidity by reducing information asymmetry. The final conclusion rests on the principle that information disclosure mechanisms, such as media coverage, play a vital role in optimizing the benefits of block trades for the Iranian capital market.

Conclusion Generally, regarding the level and trend of block trades in Iran, it can be stated that the Iranian stock market, unlike other markets, faces challenges due to issues such as inefficiency, high ownership concentration, and a lack of transparency in information disclosure. The untimely announcement of positive and negative news, coupled with investors’ mistrust in existing information, prevents the informational content of block trades from being properly reflected in stock prices. This situation leads to increased access to private information for informed investors, consequently intensifying information asymmetry between informed and uninformed investors. Moreover, the complementarity between the regular and block markets helps reduce stock liquidity shocks and, in turn, lowers the risk associated with these stocks. Companies with active block markets possess higher liquidity and experience a greater trading volume compared to the regular market. Improved liquidity following block trades aids in enhancing market efficiency. In the second part of the research, the conclusion suggests that media coverage has a positive effect on the relationship between block trades and stock liquidity. Companies with active media coverage that disclose the information and objectives of block trades in a timely manner are able to attract new buyers, thereby influencing stock liquidity.
Keywords
Block trading
stock liquidity
media coverageStock valuation
Iranian stock market

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