Stock Liquidity and Firm Value: Evidence from a Policy Experiment in India

Jawed, Mohammad Shameem; Kotha, Kiran Kumar

doi:10.1111/irfi.12200

Cited by 16 publications

(11 citation statements)

References 36 publications

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“…However, there was no causality between liquidity and the financial performance of the firms. Jawed and Kotha (2020) examined the relationship between improvement in firms' value and stock liquidity in India. Findings from the study confirmed the existence of a direct causality between stock liquidity and firm value, stemming from an improved operating performance.…”

Section: Causal Relationship Between Liquidity and Financial Performancementioning

confidence: 99%

Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Musah

Kong

et al. 2020

Sage Open

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The aim of this research was to establish the nexus between liquidity and the viability of quoted non-financial establishments in Ghana. Panel data deduced from the published annual reports of 15 entities for the period 2008 to 2017 was employed for the study. Preliminarily, cross-sectional reliance, unit root, serial correlation, heteroscedasticity, co-integration, and causality tests were respectively performed. Our findings established that there exists no cross-sectional reliance, and input variables are stationary and co-integrated with no presence of heteroscedasticity and serial correlation. Estimates from the random effects generalized least squares (GLS) regression showed that liquidity has significant adverse effect on the firms’ Return on Equity (ROE) but had insignificantly positive effect on ROE when surrogated by the cash flow ratio. Finally, test based on causalities uncovered that, with the exception of Current Ratio and ROE that are flanked by bidirectional liaison, no other causal affiliation was evidenced amid other variables. Policy recommendations are further discussed.

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Section: Causal Relationship Between Liquidity and Financial Performancementioning

confidence: 99%

Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Musah

Kong

et al. 2020

Sage Open

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“…The outcomes depict a weak but positive association among the studied variables. More so, Jawed (2017), to determine the dynamic interaction among some concerned variables, examines the existing rules governing the pattern of shareholding ability in India. The study, which uses the ordinary least square method, discovers that a variation in the liquidity status of stocks of companies in India is directly related to the variation in the performance of such companies.…”

Section: Empirical Studiesmentioning

confidence: 99%

Liquid Stock and Financial Performance of Non-Financial Quoted Companies in Nigeria

Salawu¹,

Olayinka²,

Fanneh³

et al. 2022

EJEF

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There have been several recent concerns about the deteriorating state of Nigerian companies’ performance. Many investors in Nigeria over the years have accused the quoted companies of not doing enough to improve their performances. Researchers are concerned about the factor that affects performance as a result of this. Therefore, this paper examines the influence of stock liquidity on the financial performance of companies in Nigeria. Data used are sourced from the financial statements of selected companies and the fact book of the Nigeria Stock Exchange for the period between 2012 and 2019. Data are analyzed using both descriptive and inferential statistics. The empirical findings of this study confirm that liquid stock, proxied by the turnover ratio (TOR), greatly impacts the performance of companies in Nigeria. Sequel to this, this paper concludes that the degree of operational success of Nigeria’s corporate entities is commensurate with the liquidity status of their stocks.

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“…Extensive literature addresses a set of control variables in Q regressions to report the relationship between stock liquidity and firm value. Cheung et al (2015), Jawed and Kotha (2018), and many more estimate the influence of firm age, firm size, debt to asset, short-term debt, long-term debt, and other firm-specific variables on firm value. Cheung et al (2015) assert that firm size and age improve firm value by ensuring economies of scale or by minimizing information unevenness with established firms, whereas financial leverage can affect firm value both positively or negatively contingent on whether the rewards (i.e.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Tobin's Q as a widely used measure of firm value allows researchers to investigate not only the past performance of the companies but also the future growth opportunities in it (Sauaia & Castro 2002). Scholars such as Brogaard et al (2017), Cheung et al (2015), Jawed and Kotha (2018), Raković (2018), Nguyen et al (2016), Tahir (2020), Morck et al (1988), Gompers et al (2003), etc. use Tobin's Q as a measure of firm performance in their study.…”

Section: Firm Valuementioning

confidence: 99%

“…From the operating performance-based context related to the agency theory, firms with high liquidity stocks usually face increased monitoring from external parties, high managerial pay-for-performance benefits, and the threat of exit from the institutional investors and therefore managed more efficiently. Overall, healthier price discovery mechanisms driven by better liquidity (Jawed & Kotha 2018) for these firms can help to increase their value through high operating profitability.…”

Section: Replacing Mva With the Components Of Tobin's Qmentioning

confidence: 99%

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Investigating the Relationship between Stock Liquidity and Firm Value

Shamsi¹,

Quader²,

Abdullah³

2022

bpr

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Purpose: This paper aims to investigate the effect of stock liquidity on firm value (MV), operating income to price (OIP), market value of equity to market value of the asset (MVEA), and operating income to assets (OIA) ratios in Bangladesh. This paper also investigates whether firm size, leverage, or financial crisis have any moderating role to play on the liquidity-firm value relationship. Method: The study used panel data on 159 nonfinancial firms listed in the Dhaka Stock Exchange for the period of 2006 to 2019. Ordinary Least Squares, Fixed Effect, and Two-Stage least Squares estimation methods are used to determine the desired relationship. Results: The results show that stock liquidity has a positive and significant impact on firm value and the results are robust to alternative estimation techniques. The relationship is found more acute for small and less levered firms and more intense in the post-crisis (after the 2010 stock market crash) period in Bangladesh. Implications: The role of firm size, leverage, or financial crisis on the liquidity-firm value relationship will help corporate managers to adopt policies and strategies for improving the stock liquidity, changing investors' perceptions, and overall, increasing the depth and stability of the capital market in Bangladesh or elsewhere. Limitations: Due to the unavailability of data, for the robustness check, we couldn't use any alternative proxy of stock liquidity such as bid-ask spreads.

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Stock Liquidity and Firm Value: Evidence from a Policy Experiment in India

Cited by 16 publications

References 36 publications

Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange

Liquid Stock and Financial Performance of Non-Financial Quoted Companies in Nigeria

Investigating the Relationship between Stock Liquidity and Firm Value

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