Abstract
We examine the impact of liquidity on stock price crash risk in ASEAN emerging markets (ASEAN4), i.e., Indonesia, Malaysia, the Philippines, and Thailand. This topic is helpful because previous studies found that high liquidity can reduce crash risk by monitoring blockholders. However, some research has shown that excessive liquidity encourages managers to hoard bad news for their benefit, implying a larger crash risk. We use a total sample of 129 firms from LQ45, KLCI, PSEi, and SET50 indexes, from 2010 until 2019. We run the regression analysis for a sample of ASEAN4 collectively and each country. Our results suggest that high liquidity significantly decreases stock price crash risk in ASEAN4. However, we find a contradictory result from the country-level analysis that high liquidity increases crash risk in Thailand. We also find that stocks with a high market capitalization are associated with higher crash risk in Indonesia and Malaysia.
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