Does Exposure to Foreign Competition Affect Stock Liquidity? Evidence from Industry-Level Import Data

70 Pages Posted: 12 Jan 2017 Last revised: 14 Dec 2017

See all articles by Nader Atawnah

Nader Atawnah

Department of Economics and Finance, La Trobe University

Balasingham Balachandran

La Trobe University - School of Economics and Finance; Financial Research Network (FIRN)

Huu Nhan Duong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Edward Podolski

Deakin University; Financial Research Network (FIRN)

Date Written: December 5, 2017

Abstract

We document a negative association between foreign competition and stock liquidity. Our results are robust to addressing endogeneity concerns. We identify deterioration in the information environment in response to an increase in foreign competition as the channel behind the main result. Specifically, we find that the negative association is more evident among firms that are more susceptible to the negative consequences of foreign competition and firms that are poorly monitored and have lower analyst coverage. Our paper is the first to highlight the unintended consequences of trade liberalization on financial markets.

Keywords: Stock Liquidity, Foreign Competition, Import Tariff

JEL Classification: G15, G31, G34

Suggested Citation

Atawnah, Nader and Balachandran, Balasingham and Duong, Huu Nhan and Podolski, Edward, Does Exposure to Foreign Competition Affect Stock Liquidity? Evidence from Industry-Level Import Data (December 5, 2017). Journal of Financial Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2897023 or http://dx.doi.org/10.2139/ssrn.2897023

Nader Atawnah

Department of Economics and Finance, La Trobe University ( email )

Bundoora
Bundoora, Victoria 3083 3086
Australia
61434436003 (Phone)

Balasingham Balachandran (Contact Author)

La Trobe University - School of Economics and Finance ( email )

La Trobe University
Bundoora, Vic, 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Huu Nhan Duong

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Edward Podolski

Deakin University ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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