Stock liquidity and capital structure: International evidence

Relying on the assumption that equity market provides useful information for firm decision, this study examines the effect of stock liquidity on corporate capital structure decision. We also analyze whether this effect varies according to country-level institutional environments. Using a comprehensi...

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Bibliographic Details
Published inCogent economics & finance Vol. 7; no. 1; pp. 1 - 20
Main Authors Dang, Tung Lam, Ly Ho, Hai, Dzung Lam, Chi, Thao Tran, Thanh, Vo, Xuan Vinh
Format Journal Article
LanguageEnglish
Published Abingdon Taylor & Francis 01.01.2019
Cogent
Taylor & Francis Ltd
Taylor & Francis Group
Subjects
capital decision
Capital structure
institutional environment
Leverage
Liquidity
Measurement
Securities markets
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Summary:Relying on the assumption that equity market provides useful information for firm decision, this study examines the effect of stock liquidity on corporate capital structure decision. We also analyze whether this effect varies according to country-level institutional environments. Using a comprehensive international dataset of 19,939 firms across 41 countries over 2000-2010, the paper offers two key findings. First, firms with higher stock market liquidity tend to have lower leverage. Second, countries with strong institutional environments are more likely to have a weaker (negative) relationship between stock market liquidity and leverage. These results are robust to different liquidity measurement and subsamples.
ISSN:2332-2039
2332-2039
DOI:10.1080/23322039.2019.1587804