Corporate investment and stock liquidity: Evidence on the price impact of trade

Moonsoo Kang (), Wei Wang and Chanyoung Eom

Review of Financial Economics, 2017, vol. 33, issue C, 1-11

Abstract: We document that corporate investment contributes to stock liquidity. This study demonstrates a positive relationship between abnormal corporate investment and stock liquidity in the cross-section. Moreover, stock liquidity improves more apparently for firms with financial constraints. Our robustness check confirms that the existing regularities cannot explain the current finding. This analysis suggests that corporate investment decreases the risk of a firm and that a change in the risk affects the behavior of a market maker, leading to an increase in stock liquidity.

Keywords: Stock liquidity; Corporate investment; Financial constraints (search for similar items in EconPapers)
JEL-codes: G14 G31 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:33:y:2017:i:c:p:1-11

DOI: 10.1016/j.rfe.2017.02.001

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