This paper examined the relationship of stock market liquidity on the firm value of Indian manufacturing firms included in the S&P BSE 100 Index from 2009 to 2012. The random effects panel regression model has been invoked to analyze the relationship. The empirical results support the stock market liquidity implications of firm value, that is, better liquidity of stock of companies results in higher value of the firm. The empirical results put forth that there is a positive relationship between stock market liquidity as measured by Amivest measure (1985) and firm performance as measured by Tobin's Q.
Corporate governance has an impact on both quantity and quality of corporate information disclosure which affects the level of information asymmetry and thus impacts the changes in market liquidity of stock. This article attempts to discern the relationship between corporate governance and the stock market liquidity of Indian manufacturing companies included in the S&P BSE 100 Index during the period 2009-2012 by invoking pooled regression model. The empirical results support corporate governance implications of stock market liquidity as measured by Amivest measure (1985), that is, better governed companies has higher liquidity. The results of the present study are in support of arguments made by Chung, Elder, and Kim (2010), i.e., firms may improve stock market liquidity by adopting corporate governance practices that mitigate informational asymmetries.
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