Document Type

Article

Publication Date

2-28-2017

Publication Title

Review of Financial Economics

Keywords

stock liquidity, corporate investment, financial constraints

Disciplines

Business | Corporate Finance | Economics | Finance and Financial Management

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.

DOI

10.1016/j.rfe.2017.02.001

Version

Postprint

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Volume

33

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