Abstract
The purpose of this paper is to investigate which internal factors of companies are most affecting stock liquidity in the markets of the Baltic countries. The authors of the paper investigated the dependence between the stock liquidity of Lithuanian, Latvian and Estonian companies and the company-level factors, such as size of a company, return on assets, liquidity of assets, financial leverage, profit/loss. The research evidenced that the internal factors significantly impacted stock liquidity in the Baltic markets during the entire investigated period of 2005 – 2012, however this impact was less significant during the crisis and post-crisis period.
Highlights
The significant impact on the decision about investmentattractiveness of a stock is made by expected return, stability of a company, openness to investors, but by the stock liquidity as well
The analysis of changes in one of the indicators characterizing stock liquidity, the number of transactions in the Baltic stock markets evidenced that the number of transactions considerably increased during the period of 2005 – 2007; in 2008, this number decreased by 17.5 %
The financial crisis has resulted in significant decrease of number of transactions in the Estonian and Latvian markets in 2008
Summary
The significant impact on the decision about investmentattractiveness of a stock is made by expected return, stability of a company, openness to investors, but by the stock liquidity as well. Some authors emphasize the pace of transactions [10], [16], [21] arguing that liquidity is the ability to make a transaction quickly and without a negative impact on the price (or with minor price change). Shwartz and Francioni propose that the stock liquidity may be treated as the frequency of stock trading in a market [24]. Generalization of these considerations suggests that the stock liquidity is the ability to buy or sell a stock quickly and in a high-volume without any significant impact on price and without incurring high transaction costs
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