Stock liquidity and default risk

• 成果类型: Article
• 署名作者: Brogaard, Jonathan; Li, Dan; Xia, Ying
• 署名单位: University of Washington; University of Washington Seattle; University of Hong Kong; Monash University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2017.03.003
• 发表日期: 2017
• 页码: 486-502
• 关键词: Stock liquidity; Bankruptcy risk; EDF; Price efficiency; governance

摘要

This paper examines the impact of stock liquidity on firm bankruptcy risk. Using the Securities and Exchange Commission decimalization regulation as a shock to stock liquidity, we establish that enhanced liquidity decreases default risk. Stocks with the highest default risk experience the largest improvements. We find two mechanisms through which stock liquidity reduces firm default risk: improving stock price informational efficiency and facilitating corporate governance by blockholders. Of the two mechanisms, the informational efficiency channel has higher explanatory power than the corporate governance channel. (C) 2017 Elsevier B.V. All rights reserved.