Stock liquidity and excess leverage

Zilin Chen, Kang Gao and Weiwei Huang

Finance Research Letters, 2020, vol. 32, issue C

Abstract: This study investigates whether and how stock liquidity affects firms’ leverage decisions. Results show that higher stock liquidity significantly reduces a firm's excess leverage by alleviating information asymmetry and amplifying the blockholders’ threats to exit. The results are robust when using various measures of stock liquidity and excess leverage, and when controlling for potential endogeneity problems.

Keywords: Stock liquidity; Excess leverage; Information asymmetry; Corporate governance (search for similar items in EconPapers)
JEL-codes: G12 G32 G34 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s1544612319301667

DOI: 10.1016/j.frl.2019.04.034

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