Stock market liquidity and firm value: an empirical examination of the Australian market

Nguyen, Trang, Duong, Huu Nhan and Singh, Harminder (2016) Stock market liquidity and firm value: an empirical examination of the Australian market. International Review of Finance, . doi:10.1111/irfi.12082


Author Nguyen, Trang
Duong, Huu Nhan
Singh, Harminder
Title Stock market liquidity and firm value: an empirical examination of the Australian market
Journal name International Review of Finance   Check publisher's open access policy
ISSN 1468-2443
1369-412X
Publication date 2016-04-21
Year available 2016
Sub-type Article (original research)
DOI 10.1111/irfi.12082
Open Access Status Not Open Access
Total pages 8
Place of publication Richmond, VIC, Australia
Publisher Wiley-Blackwell Publishing Asia
Collection year 2017
Language eng
Abstract We document a positive relation between stock liquidity and firm value. We examine the mechanism through which stock market liquidity enhances firm value by dividing firm value, as measured by Tobin's Q, into three components, namely, operating income to price, leverage, and operating income to assets. Using the switch to broker anonymity as an exogenous shock to market liquidity, we show that the increase in liquidity around the shock leads to an increase in firm value. Our results suggest that higher firm value for more liquid stocks seems to stem from enhanced stock prices rather than from better operating performance.
Keyword Stock market liquidity
Firm value
Australian stock market
Australian Securities Exchange
ASX
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: HERDC Pre-Audit
School of Economics Publications
 
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