Monetary Policy Adjustment, Corporate Investment, and Stock Liquidity—Empirical Evidence from Chinese Stock Market

Huaping Zhang, Jianhua Ye, Feifei Wei, Rafique Kashif and Ceyuan Cao

Emerging Markets Finance and Trade, 2019, vol. 55, issue 13, 3023-3038

Abstract: With the tightening monetary policy gradually exiting and the increasing attention to market value management, stock liquidity has become a research focus. Based on the actual situation of China’s capital market, this article empirically studies the impacts of corporate investment on stock liquidity and the underlying influencing mechanism. The study found that (1) the investment of A-share listed companies significantly reduced the market risk level of the corporate stocks and enhanced the stock liquidity; (2) corporate market risk has partial mediating effect on the relationship between corporate investment and stock liquidity; (3) during the tightening monetary policy period and in firms with high financial constraints, corporate investment has more positive effect on stock liquidity, and the mediating effect of corporate market risk is more obvious. This study clarifies the influencing mechanism of micro corporate investment and macro monetary policies on stock liquidity, and enriches the research on determinants of stock liquidity. Finally, based on the conclusions, this article puts forward policy recommendations on the credit resource allocation structure, investor education, corporate investment evaluation, and corporate market value management.

Date: 2019
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DOI: 10.1080/1540496X.2019.1612363

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