Political uncertainty and commonality in liquidity

Tung Dang, Hoang Luong, Lily Nguyen and My Nguyen

Pacific-Basin Finance Journal, 2024, vol. 83, issue C

Abstract: We examine whether political uncertainty affects commonality in liquidity worldwide. Using national elections as a proxy for political uncertainty across 40 countries over 2000–2019, we document a positive effect of political uncertainty on commonality in liquidity. This effect is stronger for firms with greater institutional ownership but weaker for those headquartered in countries with greater checks and balances and government stability, more market-friendly incumbent governments, and better institutional structures. Our findings support both the demand- and supply-side sources of liquidity as channels through which political uncertainty affects commonality in liquidity.

Keywords: Political uncertainty; National elections; Commonality in liquidity; International markets; Market volatility (search for similar items in EconPapers)
JEL-codes: G15 G23 G30 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:83:y:2024:i:c:s0927538x23003207

DOI: 10.1016/j.pacfin.2023.102249

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