Abstract
PurposeThe purpose of this paper is to investigate the interactions between free float and stock liquidity in the UK stock market over the period 2002–2016.Design/methodology/approachThis paper is conducted using cross-sectional data regression analysis. The sample consists of 15,650 firm-level observations from the UK stock market.FindingsThe findings suggest that stocks with higher levels of free float are associated with higher levels of liquidity. This relation is significant regardless of the liquidity measure used, and is evident even after controlling for firm characteristics.Originality/valueThis paper contributes to the existing literature by presenting further evidence on the significance of free float in capital markets and its effect on stock liquidity, particularly for UK firms as the minimum free float requirements as announced by the FTSE group in 2011 increased from 15 to 25 percent.
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