Macroeconomics, Firm-Specific Factors and Stock Liquidity: An Empirical Evidence from Jordan

Wasfi A Al Salamat

doi:10.5430/ijfr.v7n5p110

Abstract

The aim of this study is to identify the macroeconomics and firm-specific determinants of stock liquidity in the context of Jordan over the period (2007-2014). As a sample, all industrial firms listed in the Amman Stock Exchange are taken for analysis. Unbalanced panel data (cross-sectional and time series) is used to obtain the results. The results show that the stock liquidity is positively affected by earnings per share, interest rate, gross domestic product, leverage, and the size of the firm while negatively affected by the ratio of the market value per share to the book value per share, inflation rate, and the return on assets.

Highlights

Financial markets play an important role in the most of the developed and developing countries alike for being one of the fiscal policy instruments used in increasing the local savings and a tool for attracting foreign investments as well as its importance in financing economic development plans, especially that most of the countries are suffering from a continual deficit in their public budgets, which prompt these countries looking for a non-sovereign financial resources to finance their development plans, financial markets have become one of the most important tools that are used for such developmental purposes
That means the higher the ratio of the market value per share to the book value per share (MB), the lower the value traded, as a proxy of stock liquidity, for industrial firms listed in the Amman Stock Exchange over the period from 2007 to 2014
That means the higher earnings per share (EPS), the higher the value traded, as a proxy of stock liquidity, for industrial firms listed in the Amman Stock Exchange over the period from 2007 to 2014

Summary

Introduction

Financial markets play an important role in the most of the developed and developing countries alike for being one of the fiscal policy instruments used in increasing the local savings and a tool for attracting foreign investments as well as its importance in financing economic development plans , especially that most of the countries are suffering from a continual deficit in their public budgets, which prompt these countries looking for a non-sovereign financial resources to finance their development plans, financial markets have become one of the most important tools that are used for such developmental purposes. In order to achieve that, recent years have witnessed continuous efforts in the majority of countries to develop their financial markets and to construct the sound investment climate for them in order to attract investments for them, most of countries, especially developing ones have achieved varying degrees of success in this difficult task. The cost of capital could be reduced by deeper and increasing stock market liquidity. The individual stock liquidity could be increased by deeper and increasing stock market liquidity. In addition it is considered an important factor in determining the success of public offering, decreasing the cost of raising capital and the risk for investors as well as market makers.

Objectives

Methods

Conclusion