Business seasonality and stock liquidity

Joseph M. Marks and Chenguang Shang

Journal of Financial Markets, 2024, vol. 67, issue C

Abstract: We investigate the relation between firms' business seasonality and their stock market liquidity and find robust evidence that firms with seasonal business tend to have less liquid equity. The effect of seasonality on stock liquidity is amplified for firms facing greater information asymmetry. Furthermore, firms with seasonal business patterns are associated with a higher probability of informed trading, and their stock returns co-move less with the market. Overall, our results suggest that the business patterns of such firms may negatively affect their information environments, and investors’ concerns with regard to adverse selection impede the liquidity provision for these firms.

Keywords: Seasonality; Information asymmetry; Stock liquidity (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:67:y:2024:i:c:s1386418123000678

DOI: 10.1016/j.finmar.2023.100869

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