Review of Financial Economics
stock liquidity, corporate investment, financial constraints
Business | Corporate Finance | Economics | Finance and Financial Management
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.
Kang, Moonsoo; Wang, Wei; and Eom, Chanyoung, "Corporate investment and stock liquidity: Evidence on the price impact of trade" (2017). Business Faculty Publications. 286.
This is the author’s version of a work that was accepted for publication in Review of Financial Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Review of Financial Economics, 33, (2017), 10.1016/j.rfe.2017.02.001.
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