Return and Liquidity Relationships on Market and Accounting Levels in Brazil

Abstract

This article discusses profitability-liquidity relationships on accounting and market levels for 872 shares of publicly-traded Brazilian companies, observed between 1994 and 2013. On the market level, the assumption is that share liquidity is able to reduce some of the risks incurred by investors, making them more willing to pay a higher price for liquid shares, which would lower expected market returns. On the accounting level, the basic hypothesis argues that a firm's holding more liquid assets is related to a conservative investment policy, possibly reducing accounting returns for shareholders. Under the assumption of financial constraint, however, more accounting liquidity would allow positive net present value investments to be carried out, increasing future accounting returns, which would positively affect market liquidity and share prices in an efficient market, resulting in a lower market risk/expected return premium. Under the assumption of no financial constraint, however, more accounting liquidity would only represent a carry cost, compromising future accounting returns, which would adversely affect market liquidity and share prices and result in a higher market risk/expected return premium. Among the hypotheses, the presence of a negative market liquidity premium was verified in Brazil, with shares that traded more exhibiting a higher expected market return. On the margins of the major theories on the subject, only two negative relationships between excess accounting liquidity and market liquidity and accounting return, supporting the carry cost assumption for financially unconstrained firms, were verified. In terms of this paper's contributions, there is the analysis, unprecedented in Brazil as far as is known, of the relationship between liquidity and return on market and accounting levels, considering the financial constraint hypothesis to which the firms are subject.

O risco de informação assimétrica sobre a liquidez dos contratos futuros de commodities agrícolas

“…O resultado demostra uma alta liquidez no mercado futuro de commodities agrícolas, e vai ao encontro de Amihud e Mendelson (1986), que encontraram um bid-ask-spread médio de 0,025 no mercado americano, resultado próximo aos encontrados para as commodities analisadas. Perobelli et al (2016) ao estudarem bid-ask-spread médio de -0,329 e Ribeiro, Souza, Carvalho e Amaral (2019), ao analisarem as negociações das Brazilian Depositary Receipts (BDRs) entre 2010 e 2017, encontraram um valor médio de 3,03, resultados superiores aos encontrados neste trabalho.…”

“…As commodities ICF e CCM tiveram média de 0,053 e -0,040, respectivamente. Tais resultados evidenciaram uma alta liquidez no mercado futuro de commodities agrícolas e corroboram com os estudos de Amihud e Mendelson (1986), Perobelli, et. al.…”

Análise Do Efeito Moderador Da Liquidez No Modelo De Relevância Da Informação Contábil No Brasil

“…Diversos estudos tentaram analisar quais fatores de mercado que poderiam impactar o preço e o retorno das ações, tais como a concentração de propriedade e controle, a redução do free-float e, consequentemente, o fechamento do capital (Bortolon & Silva Junior, 2015;Perobelli, Famá & Sacramento, 2016), o aumento no caixa e, consequentemente a redução dos custos de capital (Machado & Medeiros, 2012;Perobelli et al, 2016), o evento do split (Vieira & Procianoy, 2003), o spread (Vieira, Júnior & Righi, 2015), a divulgação das demonstrações contábeis pontualmente (Correia & Amaral, 2014;Terra & Lima, 2006), a maior divulgação das empresas maiores (Vieira & Becker, 2011) e o after market short covering (Carvalho e Tolentino, 2010;Fama & French, 1993;Machado & Medeiros, 2012).…”

Financial Performance in the Public Administration Sector: Comparison Between Hungary and Romania

“…At the same time, if the operating assets as cash, inventory or accounts receivable are too high, important resources remain unused, and might diminished the companies' profitability level. This trade-off can be better explained comparing the situation of financially constrained and unconstrained firms (Perobelli, Famá, and Sacramento 2016).…”

“…The empirical literature usually assesses the interdependence between liquidity and profitability, which might be considered as two conflicting goals of working capital management (Smith and Begemann 1997). For example, Perobelli, Famá, and Sacramento (2016) investigate different theories for the profitability -liquidity relationship, considering 872 shares of publicly-traded Brazilian companies, between 1994 and 2013. Adhikary and Papachristou (2017) search for a panel of 114 microfinance firms from South Asia, the determinants of profitability, for the period 2003 to 2011.…”