Stock Liquidity Research Articles

Public access to in-house meeting reports and stock liquidity: evidence from China

Public access to in-house meeting reports and stock liquidity: evidence from China

Exit as governance: The effect of stock liquidity on firm productivity

AbstractThis study examines the effect of stock liquidity on firm productivity. Our findings indicate that stock liquidity positively affects firm productivity. Our study provides several pieces of evidence to show that stock liquidity enhances firm productivity through facilitation of corporate governance by shareholders and stock price efficiency. Additionally, we confirm that the impact of stock liquidity on productivity is more pronounced for firms with lower attendance at shareholder meetings, with less financial constraints and that are state‐owned enterprises. This study makes a valuable contribution to the existing literature by presenting novel evidence regarding the influence of stock liquidity on firm productivity in emerging markets.

Does NEEQ’s tiered system enhance corporate labour share？

ABSTRACT In the context of improving the multi-level capital market structure and promoting common prosperity, we examine the impact of NEEQ’s (National Equities Exchange and Quotations) tiered system on corporate labour share. We find that the corporate labour share significantly increases when the firm enters the innovative layer from the common layer, which indicates that tiered system can optimise the structure of labour income distribution and facilitate employees to better share the enterprises’ achievements. Our further evidences indicate that (1) this positive relation is more pronounced for firms whose stock liquidity improves more; (2) reducing the cost of capital is an important channel through which the tiered system promotes corporate labour share; and (3) the tiered system visibly affects labour share for firms facing higher financing constraints, meeting lower information transparency, or with a higher complementary effect between labour and capital factors.

Institutional Ownership and Stock Liquidity: Evidence From an Emerging Market

This research investigates whether institutional ownership contributes to enhancement of stock liquidity in emerging markets. The study examines data of listed companies on the Vietnamese stock market. Using a comprehensive data set for all stocks listed on Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) from 2008 to 2017, the statistical findings consistently demonstrate that institutional ownership has a negative impact on stock liquidity. In other words, the empirical evidence supports the adverse selection hypothesis that the upward trend of institutional ownership could reduce stock liquidity because the institutional investors with superior and advantageous information could exacerbate informational asymmetry issues. By using a case study in Vietnam, this research makes an original contribution to the academic literature by examining the relationship between institutional investors and stock liquidity in emerging markets. In addition, this study offers policymakers, authorities, agencies, and managers some insightful recommendations and implications that will help to not only promote the active participations of professional institutions but also improve stock liquidity, fairness, and efficiency.

Research on the relationship between ESG disclosure quality and stock liquidity of Chinese listed companies

<abstract> <p>In this article, we aim to verify the relationship between ESG disclosure quality and stock liquidity of listed companies and to provide a detailed analysis of its mechanisms. Based on the theories of information asymmetry, signal transmission, reputation, and stakeholder, we summarize and analyze the theoretical and logical framework of how ESG information disclosure can impact stock liquidity. Following the fixed effect (considering individual, year, and industry), panel model was applied to empirically test the relationship between ESG disclosure score and stock liquidity with data ranging from 2012 to 2021. The research findings indicate that improving the quality of ESG disclosure by companies can significantly enhance the level of stock liquidity. Furthermore, we analyze and verify through mechanism tests that ESG disclosure can influence stock liquidity by increasing analyst attention and media coverage (information effect) and enhancing reputation (reputation effect). From a theoretical perspective, the paper enriches the research related to the economic impact of ESG information disclosure and factors affecting stock liquidity. Also, we validate theories connected to information and reputation. From a practical perspective, the research has specific reference value for policymakers, enterprise managers, and investors.</p> </abstract>

Identification and Ranking of Financial, Non-Financial, and Behavioral Components Influencing Earnings Response Coefficient in the Iranian Capital Market (Data Mining Approach)

Objective: The relationship between accounting profit and investor reactions, as well as stock price changes, is measured using the Earnings Response Coefficient (ERC). Previous research indicates a variation in ERC between companies and over time, which is attributed to specific company factors and characteristics. The aim of this study is to identify and rank the financial, non-financial, and behavioral components affecting companies' ERC. Methodology: Using data from 153 companies listed on the Tehran Stock Exchange over the period 2013 to 2022, and employing data mining techniques and two methods: stepwise forward regression and regression decision tree, the influential components on ERC were identified and ranked. Findings: The results of the stepwise forward regression method indicated that the components of auditor's opinion type, earnings per share (EPS), stock liquidity, growth opportunities, earnings stability, inflation rate, sales growth, operating profit ratio, relative strength index per share, and market index return respectively influence ERC. The regression decision tree method results also showed that the components of earnings stability, stock liquidity, EPS, stock price synchronicity, stock trading imbalance, adjusted trading volume, psychological line index, relative strength index per share, earnings conservatism, and financial statement restatements respectively influence ERC. The Wilcoxon test results also showed that the ranking of components influencing ERC is not the same in the two methods. Additionally, comparing the mean absolute error of the two methods indicated that the regression decision tree method identifies and ranks the influential components on ERC more accurately. Conclusion: The results of both methods confirm the high impact of EPS, stock liquidity, earnings stability, and relative strength index per share on the ERC of companies.

IFRS adoption, information asymmetry and stock liquidity: Moderating effects of corporate governance mechanisms

The purpose of this paper is to test the impact of International Financial Reporting Standards (IFRS) adoption on information asymmetry, transaction transparency, and stock market liquidity. Furthermore, this study examined the direct and moderating effect of corporate governance devices on this relationship. We apply ordinary least squares (OLS) regression to examine changes in stock liquidity for French-listed firms between the pre-IFRS and the post-IFRS period. We show that IFRS adoption is well-perceived by financial statement users. Following Boubaker et al. (2019), R. and Firoz (2022), Bansal (2023), and Agrawal and Chakraverty (2023), we found that these standards have a positive impact on stock liquidity and a negative impact on information asymmetry. In addition, audit quality has a decisive role in improving information quality. However, contrary to expectations, the independent members of the board of directors do not exercise their role of control and monitoring efficiently. We conclude that the reporting process is influenced by firm-level characteristics, and we contribute to the literature by enhancing discussion on the debate related to the benefits of IFRS adoption. Our findings can be of interest to regulatory bodies and policymakers by providing a better understanding of the factors that influence stock liquidity and decision-making.

The impact of stock liquidity on corporate environmental information disclosure: Does climate risk matter?

<p>From the perspective of the Chinese market microstructure, we took Chinese A-share listed companies as samples to explore the impact and mechanism of stock liquidity on the quality of corporate environmental information disclosure (EID). Our results indicated that stock liquidity has a positive impact on the quality of corporate EID. Using the stock market interconnection events of the 2014 Shanghai-Hong Kong Stock Connect and the 2016 Shenzhen-Hong Kong Stock Connect as a quasi-natural experiment and applying the Ⅳ approach, the research results remained robust after controlling for endogeneity issues. Moreover, both climate physical risk and climate transition risk positively regulated the relationship between stock liquidity and the quality of corporate EID. Further analysis revealed that the positive impact of stock liquidity on the quality of corporate EID is determined by the information effect path and governance effect path of stock liquidity, and the role of the information effect path is more important. In summary, stock liquidity has had an important feedback effect on Chinese companies' active EID behavior through two pathways: Information effect and governance effect.</p>

Risk-return-volume causality on the Croatian stock market

Purpose: Causality between stock returns, volatility and traded volume for 10 most liquid stocks from Zagreb Stock Exchange (ZSE) is examined in this paper. Methodology: The paper relies on historical daily data regarding return, standard deviation and turnover for the period from 2015 to 2021. Vector Autoregressive Models (VARs) were estimated for each stock in-dividually. Based on estimated VAR models, Granger-causality tests were performed to estimate causality between trading volume, stock returns and volatility for most liquid stocks from the Croatian stock market. Results: Results strongly confirm that traded volume Granger causes volatility. Return remained irrelevant in terms of predicting traded volume and volatility of stock returns. Conclusion: Causality from return to volatility or causality from volatility to return can be confirmed only in shorter periods. Traded volume causes volatility for the majority of stocks regardless of how volatility was calculated. Causality from volatility to return and causality from volatility to volume are valid for half of the sample and need to be further investigated.

Analysis of the Specified Paint Company’s Financial Performance together with the Impact on Stock Liquidity

Analysis of the Specified Paint Company’s Financial Performance together with the Impact on Stock Liquidity

Exploring investor attention in Shariah markets, macroeconomic influences, and corporate performance: Insights from Indonesia

This study examines the influence of Investor Attention, as reflected by Google Search Volume (GSV), on the performance metrics of firms—specifically Return (RET) and Stock Liquidity (LIQ)—within Publicly Listed Companies (PLCs) listed on the Jakarta Islamic Index (JII) of the Indonesia Stock Exchange (IDX). The investigation addresses a significant gap in the existing literature by focusing on Sharia-compliant investments within emerging markets, where the interplay between internet-fuelled investor behaviour and market outcomes remains underexplored. This gap is particularly relevant given Indonesia's rapid internet adoption rates and the burgeoning interest in Sharia-compliant financial products. Incorporating a comprehensive set of macroeconomic variables, this research provides a nuanced analysis of how broader economic conditions interact with firm performance in the context of Islamic finance. The methodological approach utilizes panel regression analysis on a robust dataset comprising 792 firm-month-year observations across 11 PLCs from January 2015 to December 2020. This period was chosen to capture the dynamic shifts in market conditions, offering a timely insight into the responsiveness of Sharia-compliant firms to global economic disruptions. Empirical findings reveal a nuanced landscape of influences: while Investor Attention does not significantly correlate with RET in relation to interest rates, it does exhibit a strong positive association with LIQ. Furthermore, the analysis highlights significant adverse effects of inflation and exchange rates on RET, underscoring the sensitivity of Sharia-compliant investments to specific macroeconomic stresses. These results contribute novel insights into the differential impact of economic factors on the returns and liquidity of firms within the JII, challenging prevailing assumptions in the field of Islamic finance. The study's implications extend beyond academia to practical applications for investors, policymakers, and industry practitioners. It elucidates the importance of leveraging internet-based metrics like GSV to gauge investor sentiment and its subsequent impact on market performance. Additionally, the findings advocate for enhanced monitoring and adaptive strategies in managing Sharia-compliant investments, particularly in volatile economic climates. Ultimately, this research not only fills a critical gap by linking internet-driven investor behaviour with financial performance in Sharia markets but also paves the way for more informed decision-making in the burgeoning sector of Islamic finance.

Long-term shareholder perks and stock price reaction.

This study aimed to examine the impact and source of announcements introducing additional long-term shareholder perks on stock prices of Japanese listed companies. We produced more precise analysis results by categorizing the total sample into favorable change and unfavorable change sample. As a result, we found that long-term shareholder perks have a positive impact on stock prices through the expansion of the shareholder base in the case of a favorable change, whereas there is no negative impact on stock liquidity due to an increased number of long term individual shareholders. On the contrary, in the case of an unfavorable change, we found a weak trend of shrinkage in the shareholder base due to individual shareholders' defection and a consequent decrease in stock liquidity. In the case of a favorable change, the long-term shareholder perks program functions as a means to increase the number of shareholders and encourage them to hold the shares for a longer period of time.

Causality between Economic Policy Uncertainty, Economic Growth and Stock Liquidity: Evidence from ASEAN markets

Abstract This research investigates the causal relationships among economic policy uncertainty, economic growth, and stock market liquidity in ASEAN markets, focusing on the extent and directionality of these relationships. Using Granger causality tests on data from six ASEAN countries, the study assesses the impact of economic policy uncertainty on economic growth and stock market liquidity using price-range and volume-based measures. The findings reveal no significant causal effect of economic policy uncertainty on economic growth or stock market liquidity but identify significant causal effects of economic growth on stock market liquidity for price-range measures and of stock market liquidity on economic policy uncertainty. This underscores the complex interplay within emerging markets and suggests resilience against policy uncertainty. Recommendations emphasize the need for investors and policymakers to consider broader economic indicators and market-specific liquidity measures when evaluating the impact of economic policy uncertainty, advocating for diversified strategies and policies to stabilize economic growth to enhance market liquidity indirectly.

Liquid Stock as an Acquisition Currency

Liquid Stock as an Acquisition Currency

Resiliência das ações top-5 brasileiras ao longo de 13 anos de eventos político-econômicos

ABSTRACT Purpose: This study analyzes how political-economic events have affected the Brazilian capital market over 13 years by evaluating the abnormal returns of the five most liquid stocks (Top-5). Originality/value: This research proceeds from previous studies by analyzing various political-economic events that impacted, to some extent, the prices of companies listed on the Brazilian Stock Exchange over 13 years. Considering both favorable and opposing evidence to the efficient market hypothesis (EMH), this study provides an original and robust test to evaluate market efficiency, considering various events and companies. Design/methodology/approach: We used the event study methodology to measure the impact of each event on stock prices by using the day before and after the event analyzed. We performed capital asset pricing model (CAPM) estimations with 110 observations before the event to assess abnormal returns. To assess the research hypotheses, we used the average abnormal return test around the event (Window – 1.1). Findings: We found that the five major companies in the Brazilian stock market were efficient in the EMH semi-strong form test despite 13 years of extreme events. Their returns did not change significantly after the events, differentiating themselves from studies that question market efficiency. Therefore, market participants should not expect abnormal returns in similar events.

Does Short Selling Disclosure Decrease the Liquidity of Individual Stocks?

Does Short Selling Disclosure Decrease the Liquidity of Individual Stocks?

The Eco-Friendly Side of Analyst Coverage: The Case of Green Innovation

Green innovation is a key solution to resource depletion and natural environment deterioration. It is advancing the march toward marrying business with sustainability worldwide. Embodying green elements in core innovative activities naturally becomes the critical information for the external assessments of organizations. To identify this information channel effect, the current study is intended for shedding light on the effects of financial analysts, a prominent and professional stakeholder group, on corporate green innovation. Combining the comprehensive incoPat database with the data of Chinese publicly listed manufacturing firms over the period from 2003 to 2017, the empirical results show that analyst coverage could significantly improve firms’ green innovation performance. It is also observed both institutional ownership and stock liquidity significantly enhance the positive relationship between analyst coverage and corporate green innovation. The information-based mechanisms are further identified by the split sample analysis based on the quality of financial information, when either the choice of audit company or the disclosure quality rank is applied. These findings provide beneficial supports for the idea that leaning on the monitoring from the financial analysts, managers could be encouraged to promote green investment with its long-time horizon and correct the myopia that overly focuses on short-term performance.

Examining the Impact of Company Size, Ownership Structure, Liquidity, and Industry Type on Continuous Innovation Capability in Companies Listed on the Tehran Stock Exchange

Objective: Studying the factors influencing companies' innovation capability is of great importance. Therefore, the main objective of this research was to examine the effects of company size, ownership structure, liquidity, and industry type on the continuous innovation capability of companies listed on the Tehran Stock Exchange. Methodology: Given the structure of the data studied in this research, which included the time dimension (2011 to 2022), the panel data method was used. The statistical population of this study is the Tehran Stock Exchange and all companies listed on it. A purposive sampling method was used in this research. Using this method, the research sample included manufacturing companies listed on the Tehran Stock Exchange during the period from 2011 to 2022. Additionally, EViews software version 12 was used to analyze the data. Findings: The findings showed that the coefficient of the variable company size on companies' innovation capability was 0.088 and the estimated T-statistic was 2.58. Therefore, it can be stated that company size has a positive and significant effect on companies' sustainable innovation capability. Additionally, the coefficient of the variable ownership structure on companies' innovation capability was 0.077 and the estimated T-statistic was 3.17, which indicates that ownership structure has a positive and significant effect on companies' sustainable innovation capability. The variable stock liquidity on companies' innovation capability had a coefficient of 0.1035 and an estimated T-statistic of 2.43. Finally, the coefficient of the variable industry type on companies' innovation capability was 0.1035 and the estimated T-statistic was 2.43. Therefore, it can be stated that industry type has a positive and significant effect on companies' sustainable innovation capability. Conclusion: It can be concluded that the larger the companies and the more transparent the ownership structure, the higher the companies' innovation capability.

Short-term Trading and Stock Mispricing

This paper examines the influence of short-term trading on stock mispricing. Using a mispricing index proposed by Stambaugh, Yu, Yuan (2012, 2015) as a proxy for stock mispricing, This paper investigates how sensitive quarterly short-term institutional trading is to changes in the level of stock mispricing. This paper’s main finding is that trading by short-term institutions is negatively associated with the change-of-stock mispricing index, especially when stock liquidity is high. This paper supports the theoretical view of Cespa, Vives (2015), in which short-term trading can improve price informativeness when liquidity trading is persistent. Also, this research contributes to a better understanding of the interplay between short-term trading and stock mispricing, offering insights into its role in enhancing price efficiency and market dynamics.

Predicting the Direction of the Lq45 Stock Market in Indonesia

To cope with the unpredictability of the stock market, investors should have a solid understanding of the ups and downs of bullish and bearish phases. This is especially true when looking at Indonesia's LQ45 index, which consists of 45 of the most liquid stocks in Indonesia. This study carefully predicts the future direction of movement of the LQ45 stock price index by first figuring out its bearish and bullish periods, and then finding important macroeconomic factors. In this study, techniques such as X13 ARIMA SEATS, Bry-Boschan, and Binomial Logistic Regression are used to find clear bullish and bearish phases in the LQ45 index time frame. These techniques also point out certain macroeconomic indicators, such as Motor Sales, Retail Sales, Oil Price, BI Rate, 1-month Deposito Rate Working Capital Rate, Rupiah Exchange Rate, Inflation Narrow Money, Broad Money, US PMI Manufacture, and US Inflation, which have a great effect on these market conditions, as indicated by their p-values. Based on these insights, predictive models were created to show how the LQ45 index may change in the future. These models provide asset management companies with a solid basis for making smart investment decisions, with a tendency to be more aggressive when the market is up and more cautious when the market is down. This study is special because it combines the analysis of LQ45 index market trends with important macroeconomic factors in a way that has never been done before in the Indonesian market.