We examine the relationship between free float and multiple dimensions of stock liquidity and price discounts in an emerging market. Our findings suggest that free float significantly affects all dimensions of stock liquidity. Findings further indicate the inadequacy of the regulatory definition of float and provide evidence for the differential impact of the type of investors on liquidity—both during normal and crisis periods. Finally, we establish a link between stock liquidity and price discounts. The article contributes to the sparse literature on market microstructure in emerging markets and has direct implications for policy and investors in considering free float instead of public shareholding.
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