Institutional determinants of bid–ask spreads in Caribbean offshore stock exchanges

Abstract My study contrasts the influence of firm level adoption of shareholder value governance against that of formal institutional quality on listed firm’s bid ask spread in a unique sample of eight Caribbean offshore stock exchanges. Using panel data from 146 listed firms from 2004 to 2017 my findings reveal the importance of Worldwide Governance Indicator dimensions of corruption control and regulatory quality in explaining firm’s bid ask spreads. Furthermore, formal institutional quality is consistently statistically superior in explaining firm’s bid ask spreads than firm level governance adoption. My findings emphasise the importance in considering political economy in offshore financial markets.