Asset Liquidity and Stock Liquidity: International Evidence

34 Pages Posted: 11 Apr 2014

See all articles by Charlie Charoenwong

Charlie Charoenwong

Nanyang Technological University (NTU)

Beng Soon Chong

Nanyang Technological University (NTU) - Nanyang Business School

Yung Chiang Yang

University College Dublin (UCD) College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April/May 2014

Abstract

This study examines the relationship between asset liquidity and stock liquidity across 47 countries. In support of the valuation uncertainty hypothesis, we find that firms with greater asset liquidity on average have higher stock liquidity. More importantly, our study shows that asset liquidity plays a more significant role in resolving valuation uncertainty in countries with poor information environment. For example, we find that the asset–stock liquidity relationship is stronger in countries with poor accounting standards. We further find evidence that after the adoption of IFRS, the improved accounting information environment results in a weaker asset–stock liquidity relation, but only in countries with a strong legal regime. Finally, our study shows that the positive asset–stock liquidity relationship may be attributed to transparency and/or liquidity reasons.

Keywords: stock liquidity, asset liquidity, IFRS, transparency, cash holdings

Suggested Citation

Charoenwong, Charlie and Chong, Beng Soon and Yang, Yung Chiang, Asset Liquidity and Stock Liquidity: International Evidence (April/May 2014). Journal of Business Finance & Accounting, Vol. 41, Issue 3-4, pp. 435-468, 2014. Available at SSRN: https://ssrn.com/abstract=2423587 or http://dx.doi.org/10.1111/jbfa.12052

Charlie Charoenwong (Contact Author)

Nanyang Technological University (NTU) ( email )

Nanyang Business School, BF Division
S3-01c-104
Singapore, 639798
Singapore
+65 6790 4799 (Phone)
+65 6791 3697 (Fax)

Beng Soon Chong

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Singapore, 639798
Singapore

Yung Chiang Yang

University College Dublin (UCD) College of Business ( email )

Belfield
Dublin, 4
Ireland

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