Abstract–A Multivariate Analysis of Relationships between a Company's Liquidity Position and Common Stock Price

James E. Townsend

Journal of Financial and Quantitative Analysis, 1975, vol. 10, issue 4, 657-657

Abstract: Reports of firms with working capital problems have been widespread in recent years, particularly since the Penn Central debacle, whose failure caused a genuine confidence crisis which spread rapidly throughout all segments of the financial markets. A survey of the literature produced little evidence which had sought to determine the impact of a company's liquidity position on the market price of its common stock. This study first laid a theoretical framework for explaining possible effects of various levels of liquidity on equity values. Then, four hypotheses were investigated:1. A corporation's liquidity position has an identifiable impact upon investors' evaluation of a common stock.

Date: 1975
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