TY - JOUR
T1 - Corporate investment and stock liquidity: Evidence on the price impact of trade
AU - Kang, Moonsoo
AU - Wang, Wei
AU - Eom, Chanyoung
PY - 2017/4/1
Y1 - 2017/4/1
N2 - 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.
AB - 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.
KW - Corporate investment
KW - Financial constraints
KW - Stock liquidity
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U2 - 10.1016/j.rfe.2017.02.001
DO - 10.1016/j.rfe.2017.02.001
M3 - Article
SN - 1058-3300
VL - 33
SP - 1
EP - 11
JO - Review of Financial Economics
JF - Review of Financial Economics
ER -