Financial constraints, stock liquidity, and stock returns

Li, Xiafei; Luo, Di

doi:10.1016/j.intfin.2019.101139

Cited by 17 publications

(11 citation statements)

References 93 publications

(139 reference statements)

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“… Brogaard, Li & Xia (2017) suggested that a decrease in the market value of a firm and stock price illiquidity increases the likelihood of default. Similarly, Mselmi, Hamza, Lahiani & Shahbaz (2019) and Li & Luo (2019) provided evidence on the pricing of financial distress. In this context, we consider three possible shocks to market capitalization.…”

Section: Stress Scenarios and Datamentioning

confidence: 96%

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

Mirza

Rahat

Naqvi

et al. 2023

The Quarterly Review of Economics and Finance

138

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Highlights A decline of market capital from Covid-19 will increase the default likelihood. The mining, construction and retail sectors are most vulnerable to market shock. Given a moderate deterioration in economic profile, a tax deferral is sufficient. For exacerbating shocks, debt and equity support is essential to avoid a meltdown.

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Section: Stress Scenarios and Datamentioning

confidence: 96%

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

Mirza

Rahat

Naqvi

et al. 2023

The Quarterly Review of Economics and Finance

138

View full text Add to dashboard Cite

show abstract

“…Stock liquidity drives investors' sentiments (Asem et al, 2016) and dividend policies (Nguyen, 2020), and it is always associates with minimum equity floatation cost (Belkhir et al, 2020). It controls ex-ante stock excess return (Amihud, 2002;Li & Luo, 2019); therefore, the investors are enthusiastic about investing in those firms whose equity is highly liquid. The positive effects of stock liquidity on shareholder value reinforce effective governance (Cheung et al, 2015).…”

Section: Capital Market and Trade Credit Policiesmentioning

confidence: 99%

Stock Liquidity and Corporate Trade Credit Strategies: Evidence From China

Shahzad

Liu

Luo

2021

Journal of Business Economics and Management

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This study investigates the nexus of stock liquidity and trade-credit policies in China from 2002 to 2017. The estimates are robust to alternative proxies, various fixed-effects, and the exogenous impact of Chinese split share structure reforms (SSSR) 2005-06 is investigated through the difference-in-difference analysis. The results validate that stock liquidity significantly impacts firms’ capacity to produce more trade credit supplies and less reliant on trade credit demand. The study applied SUEST analysis to investigate the effect of the Chinese institutional setting. The nexus of stock liquidity and trade credit strategies is substantial in state-owned enterprises. Additional analysis revealed that the said association is more visible to credit-constrained and equity-reliant enterprises. The policymakers should focus on market liquidity because it elevates firms’ capacity to mobilize capital through trade credit provisions. The micro aspect of this study suggests that stock liquidity allows managers to shape non-price competitive strategies and avoid excessive usage of trade credits.

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“…In corporate finance, a vital concern is the influence of financial constraints on performance and behavior of firms (Li and Luo 2019). Kurt (2018) indicates that financial constraints have great influence on the accounting information quality.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Environmental Sustainability Disclosure on Stock Return of Saudi Listed Firms: The Moderating Role of Financial Constraints

Alsahlawi

Chebbi

Ammer

2021

IJFS

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Environmental sustainability represents nowadays a significant factor for business sector. Firms carry out many initiatives to develop environmental practices. Investors increasingly consider environmental discloser by firms and integrate this disclosure into the investment decision-making process. Using a database of Saudi listed firms, this study adds to the literature by examining the relationship between the environmental sustainability disclosure and stock return and whether this relationship is moderated by the financial constraints. We find that the environmental sustainability disclosure has significant and negative impact on stock return, indicating that investors do not consider environmental disclosure when valuing the stocks. Furthermore, our results propose that the negative impact of environmental disclosure on stock return is more evident in firms with financial constraints. This study provides managerial implications for regulatory authorities, firms and investors. The environmental practices can be value relevant. However, these practices need to be efficiently integrated into stock valuation.

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Financial constraints, stock liquidity, and stock returns

Cited by 17 publications

References 93 publications

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

Stock Liquidity and Corporate Trade Credit Strategies: Evidence From China

The Impact of Environmental Sustainability Disclosure on Stock Return of Saudi Listed Firms: The Moderating Role of Financial Constraints

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