Stock Liquidity Research Articles

Analisis Faktor-Faktor yang Mempengaruhi Likuiditas Pasar Saham

The objective of this study is to obtain valid evidence regarding the individual effects of the variables Firm Value, earnings management, and stock risk on stock market liquidity. Stock Liquidity, Earning Management, Firm Value, and Stock Risk are measured respectively by Total Volume Activity, discretionary accrual model modified Jones, PBV, and Beta. Research in the form of causality. Samples were selected using a purposive technique. The data is extracted from the company's annual financial reports accessed from official sources. The samples were 16 companies from the infrastructure sub-sector manufacturing group listed on the IDX during the 2017-2021 period, so that 80 observation data were obtained. Multiple regression is used for data analysis, where the tests include multicollinearity tests, partial-t tests and coefficient of determination tests. The findings of this study show that Earning Management, Firm Value, and Stock Risk affect Stock Market Liquidity

How does corporate ESG performance affect stock liquidity? Evidence from China

This study examines whether and how corporate environmental, social, and governance (ESG) performance is associated with firm's stock liquidity. We find robust evidence that ESG performance statistically and significantly increases firm's stock liquidity. The results of channel tests indicate that ESG performance increases firm's stock liquidity by lowering corporate risk and gaining stakeholders' support. Additionally, we find that the positive effect of corporate ESG performance is driven by all the three dimensions. Collectively, our study highlights the importance of corporate ESG performance and its economic consequences.

Stock bubbles under sudden public crises: A perspective from the excessive financialization of firms

This paper examines the crowding-out effect of the sudden onset of COVID-19 on the share price bubbles of over-financialized firms, and identifies the mechanisms responsible for this effect. Our findings suggest that COVID-19 has a significant crowding-out effect on the share price bubbles of over-financialized firms, which can be attributed to its impact on subjective investor sentiment and objective stock liquidity. The crowding-out effect is heterogeneous between different ownership, debt structure, and COVID-19 pandemic shocks. Our research suggests that the virtual economy may face a higher risk of the bubble bursting under the sudden public shock.

Firm valuation in Brazil: evidence of overvaluation in the valuation reports

Under the Agency theoretical framework, information asymmetry is crucial in stakeholders’ conflicts. This problem may be present in the process of firm valuation. This work aims to analyze the determinants of the added value of firm financial experts’ valuations, i.e., the difference between disclosed firm value in the valuation report and firm market value. The study assesses the effect of ownership concentration, firm size, the costs of preparing the valuation report, and stock liquidity estimating a set of econometric models. The sample is composed of all firm valuation reports undertaken in Brazil between 2002 and 2012 with data hand collected from CVM (The Brazilian SEC) website and Economatica database. The results indicate that ownership concentration is directly related to the added value of financial experts’ valuations, indicating a possible problem of information asymmetry that benefits controlling shareholders who may be interested in higher firm valuation. The findings also indicate that firm size, higher cost of the firm valuation process, and firm market liquidity are associated with firm value overestimation. The paper contributes to the literature on firm valuation by using an important database with hand collected data from all firm valuation processes recorded at the CVM. Studies on firm valuation in Brazil are still scarce so that the finding that ownership concentration matters for firm valuation is important by showing that such process may be a source of agency conflicts.

Does stock liquidity determine dividend policy? New evidence from an emerging market

This paper aims to test the relationship between stock liquidity and dividend policy using a sample of UAE-listed firms during the period from 2013 to 2019. A panel regression model was applied on data from 42 firms listed on Dubai’s financial market and the Abu Dhabi stock exchange. The findings, which show that dividend policy is positively related to stock liquidity, are robust across different stock liquidity measures. Furthermore, we found that the impact of stock liquidity on dividend policy is stronger in small firms where the level of information is low. This paper provides evidence that stock liquidity has a positive impact on dividend policy, which supports the argument that stock liquidity provides information to the market and therefore encourages insiders to pay out dividends. The findings of this study can help researchers, analysts and investors to better understand the implications of stock liquidity on corporate policies. The study also contributes to our understanding of whether managers use dividend policy as a corporate tool to deal with information asymmetry.

Stock Liquidity and Investment Efficiency: Evidence from the New Regulation of Insider Selling in China

Stock Liquidity and Investment Efficiency: Evidence from the New Regulation of Insider Selling in China

How Does Gender Diversity Moderate the Relationship between Income Smoothing and Stock Liquidity? Evidence from Egypt

How Does Gender Diversity Moderate the Relationship between Income Smoothing and Stock Liquidity? Evidence from Egypt

Stock Liquidity and State Ownership: Evidence from the Banking Industry of Selected Asian Emerging Markets

Manuscript type: Research paper Research aims: Liquidity creation is deemed important in the emerging markets banking industry. It turns out to be more challenging when subject to ownership issues, particularly state ownership. The government possesses substantial ownership in many large banks in Asian emerging markets and has a significant effect on firms’ stock liquidity through trading activity. Hence, state ownership is a key determinant of stock liquidity. This paper investigates the effect of state ownership on stock liquidity in Asian emerging markets. Design/Methodology/Approach: Using the GMM panel regression model, this study examines a sample of 209 banks in Asian emerging markets including China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan, and Thailand from 2009 to 2018. For the robustness test, an alternative liquidity measure is conducted. Research findings: Results show that state ownership is positively related to stock liquidity, implying that the participation of the government provides investors’ confidence and perceives these stocks as value-enhancing stocks. However, this positive effect on stock liquidity turns out to be negative when the state ownership surpassed a certain threshold. Thus, this paper finds a non-linear inverse U-shaped relationship between state ownership and stock liquidity. Further analysis also shows that large banks tend to enjoy greater liquidity compared to smaller banks. Theoretical contribution/Originality: Unlike past studies that focus on other ownership structures, this study focuses on state ownership of large banks in emerging markets. This study contributes by collectively addressing the impact of state ownership on stock liquidity, with a focus on the banking industry in the Asian emerging markets context. Practitioner/Policy implications: The findings of this study can benefit investors, policymakers, and other stakeholders to better understand the impact of state ownership on stock liquidity. There are various implications in terms of investment decisions and corporate governance policies pertaining to corporate ownership structure. Research limitation: Future studies may consider conducting sub-samples using a different threshold of state ownership. Besides, this study focuses on the banking sector and hence the results may not be generalised.

The impact of policy uncertainty on stock liquidity in Vietnam’s M&A market

This study investigates the impact of policy uncertainty on stock liquidity in Vietnam’s M&A market. Using a comprehensive sample of M&A acquisition deals over the 2005-2020 period, we find that policy uncertainty is negatively associated with stock liquidity of target firms, indicating that firms should increase their information disclosure to improve the information environment during periods of increased asymmetric information due to policy uncertainty. We also find that higher levels of policy uncertainty lead to lower market valuations of target firms, reflecting greater market skepticism about the completion of the transaction and related synergy benefits. This study highlights the importance of transparency in improving stock liquidity and suggests that policymakers need to consider the impact of domestic economic and investment policies on M&A activity and stock liquidity in Vietnam.

The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation

ABSTRACTUsing the implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system from 1993 to 1996 as a shock to information dissemination technologies, we examine how a significant reduction in disclosure processing costs affects the real economy. We find that the EDGAR implementation leads to an increase in corporate investment and that this effect is concentrated in value firms. We provide evidence that improved equity financing and enhanced managerial incentives are likely the underlying mechanisms. Specifically, the EDGAR implementation leads to an increase in a firm's stock liquidity, a decrease in the cost of equity capital, and an increase in the level of equity financing. Consistent with the monitoring effect of broad information dissemination, the EDGAR implementation leads to an increase in a firm's operating performance. Our findings suggest that it is important to consider information dissemination beyond information production when examining the real effects of corporate disclosures.

STUDI KOMPARASI KINERJA SAHAM UNGGUL DAN SAHAM LIKUID SEBELUM DAN SAAT PANDEMI

The pandemic Covid-19 is a pandemic that attacks public health so that it has an impact on the economy, especially the capital market. The pandemic Covid-19 resulted in a weakening of the IHSG by up to 26.96%, apart from the weakening of the IHSG there were superior and liquid stocks which were the stocks most in demand by investors because they had the best performance and had a high probability of providing high profits. The purpose of this research is to compare the performance of superior stocks and liquid stocks before and during the pandemic by using stock returns, transaction volume and stock risk. By using the Wilcoxon rank test method. The results of this study indicate that stock performance through stock returns on superior stocks does not have a significant effect and there is a decrease during a pandemicc, while liquid stock returns also do not have a significant effect but there is a slight increase during a pandemic, the transaction volume of superior stocks and liquid stocks has a significant effect and occurs an increase in transaction volume during a pandemic, the risk of superior stocks and liquid stocks also has a significant influence and there is an increase in risk during a pandemic.

Stock Liquidity and Cash Holdings: Evidence from Malaysia

The level of cash held by listed companies has raised academic interest. In particular, many studies have been conducted to understand the reason why companies hold so much cash. Previous studies on the determinants of cash holdings have focused on firm-specific characteristics. More recently, researchers have found that stock liquidity played an important role in explaining the cash holding behaviour. This study examines the effect of stock liquidity on cash holdings among listed companies in Malaysia. The findings indicate that stock liquidity has a positive impact on cash holdings. This suggests that companies have a higher propensity to hold cash to repurchase its own stocks, which resulted in higher stock liquidity.

Customer concentration and stock liquidity

This research empirically examines how customer concentration affects stock market liquidity of supplier firms. We find that firms with a concentrated customer base are strongly and positively associated with stock market liquidity, which is robust to a battery of model specifications and endogeneity issues. The positive relationship between customer concentration and liquidity is concentrated among firms with relatively small size, high financial constraints, and high information asymmetry. Further analyses provide supportive evidence on the monitoring role of principal customers in improving firms’ stock liquidity. Overall, these findings suggest that relationships with principal customers serve as valuable signals for the underlying quality of firms, and thus firms in such relationships are able to achieve favorable economic outcomes.

Stock liquidity and controlling shareholders' encroachment of private interests: Evidence from China

This paper investigated the effects of stock liquidity on controlling shareholders’ encroachment of private interests. It showed that stock liquidity positively affects controlling shareholders’ encroachment of private interests in China's listed companies. Further, institutional investor ownership and stock price crash risk have a mediating effect on stock liquidity toward controlling shareholders’ encroachment of private interests, respectively. This research strives to provide valuable insights for management to strengthen stock liquidity assessment and improve corporate governance.

BOARD EFFECTIVENESS AND FIRM VALUE: A MEDIATING ROLE OF STOCK LIQUIDITY

We test whether an effective board affects firm value (FV) in Pakistan and whether stock liquidity (LIQ) mediates this relationship. To test this conjecture, we introduce an effective board index (EBI) using board size, board independence, board diversity and CEO duality. By employing the fixed effect model, we find that an effective board reduces agency costs and thus increases FV. An effective board may signal investors positively regarding reduced information asymmetry, thereby increasing stock LIQ. Furthermore, stock LIQ partially mediates the relationship between the effective board and FV. However, only Amihud illiquidity mediates this relationship, which suggests the stock liquidity’s estimation matters.

Stock liquidity and investment efficiency: Evidence from the split-share structure reform in China

Using China’s split-share structure reform, we examined the effect of stock liquidity on investment efficiency. We found that enhanced stock liquidity results in more efficient investments and the effect is much more pronounced for under-investing firms than for over-investing firms. Additionally, we found that an increase in institutional ownership and price efficiency generated by a change in stock liquidity is positively associated with a reduction in under-investment. Thus, these findings suggest that under-investing firms with liquid stocks have more informed investors and face greater pressure to select an optimal investment level in the post-reform period.

Stock Liquidity and Cash Holdings: Evidence from Stock Buybacks

In view of the traditional view that stock liquidity reduces the cash holding level of listed companies by alleviating financing constraints and restraining agency costs, this paper starts from the company's stock repurchase motivation and finds that high stock liquidity may strengthen the company's stock repurchase motivation and thus promote the company to improve its cash holding level. Based on the empirical evidence of Chinese A-share listed companies from 2011 to 2021, it is shown that stock liquidity can significantly increase the company's cash holdings, and through the relaxation of the buyback policy in 2018 as an exogenous shock, it is verified by the differential difference method that after the relaxation of the policy, the company with high stock liquidity will increase more cash holdings than the company with low stock liquidity. Further research shows that the property rights of listed companies and the heterogeneity of the characteristics of senior executives will affect the promoting effect of stock liquidity on cash holdings.

Comparative Analysis Of Stock Liquiditi Level, Price Share And Stock Returns Before And After Stock Split On The Compass 100 Index Year 2017-2021

This study aims to examine differences in stock liquidity, stock prices and stock returns before and after a stock split. This type of research is quantitative research. The objects in this study were companies listed on the Indonesia Stock Exchange (IDX) in the Kompas 100 index category. The sampling technique in this study used purposive sampling. The number of samples is 13 companies. Data collection using documentation techniques. The results of the paired sample t-test showed that there was no difference in stock liquidity before and after the stock split with a significance value of 0.968. There is no difference in stock prices before and after the stock split with a significance value of 0.079. There is a difference in abnormal returns before and after the stock split with a significance value of 0.000.

Does Monetary Policy Determines Liquidity? New Evidence from Pakistan Stock Market

Monetary policy and its influence on liquidity is one of the most contentious issues in recent periods. As Pakistan is an emerging market with growing opportunities so people’ interest is increasing and investors are more concern about liquidity position of Pakistan market. This research using sample of 100 firms listed at Pakistan Stock Exchange (non-financial) for the period 2000-2020. In first step, simple regression is estimated to investigate the effect of monetary policy on market liquidity. In which the liquidity of market in month t is modeled as a function of the Industrial growth rate (IGRt), Inflation rate (INFt), market return (RMt), standard deviation (SDt) and real interest rate (INTt). In second step, in-depth investigation is encountered that how announcement of new monetary policy determines the liquidity of individual stocks listed on PSX 100 index. For that purpose, panel regressions (fixed effect model) are estimated in which the liquidity (LIQi,t) of stock i in month t is modeled as a function of the (one-month lagged) SBP’s monetary policy, the interaction term and other lagged control variables. Findings can be summarized firstly, at stock market level, results confirm that expansionary monetary policy entails more liquid stock markets. Secondly, study complement the micro analysis and find that expansionary (restrictive) monetary policy results in an increase (decrease) in stock liquidity. This study is helpful for investors in devising investment plans on the basis of assessing certain facets of liquidity like risk, return, inflation rate, trading volume.

Automated stock picking using random forests

We derive a stock ranking by applying a technical features-based random forest model on an international dataset of liquid stocks. Rather than predicted return, our ranking is based on outperformance probability. By applying a decile split, we find that long–short portfolios achieve Sharpe ratios of up to 1.95 and a highly significant yearly six-factor alpha of up to 21.79%. Moreover, we show that outperformance probabilities serve as a superior measure of future returns in the context of portfolio optimization. Mean–variance portfolios using this measure are less volatile and more profitable than equally- or value-weighted portfolios. Our findings are robust to firm size, regional restrictions, and non-crisis periods and cannot be explained by limits to arbitrage.