Stock market liquidity and firm value

• 成果类型: Article
• 署名作者: Fang, Vivian W.; Noe, Thomas H.; Tice, Sheri
• 署名单位: Tulane University; Rutgers University System; Rutgers University Newark; Rutgers University New Brunswick; University of Oxford; University of Oxford
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.08.007
• 发表日期: 2009
• 页码: 150-169
• 关键词: Stock market liquidity; firm performance; Feedback mechanism; Managerial compensation; Blockholder intervention

摘要

This paper investigates the relation between stock liquidity and firm performance. The study shows that firms with liquid stocks have better performance as measured by the firm market-to-book ratio. This result is robust to the inclusion of industry or firm fixed effects, a control for idiosyncratic risk, a control for endogenous liquidity using two-stage least squares, and the use of alternative measures of liquidity. To identify the causal effect of liquidity on firm performance, we study an exogenous shock to liquidity-the decimalization of stock trading-and show that the increase in liquidity around decimalization improves firm performance. The causes of liquidity's beneficial effect are investigated: Liquidity increases the information content of market prices and of performance-sensitive managerial compensation. Finally, momentum trading, analyst coverage, investor overreaction, and the effect of liquidity on discount rates or expected returns do not appear to drive the results. (C) 2009 Elsevier B.V. All rights reserved.