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Asset Liquidity and Stock Liquidity: International Evidence

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  • Charlie Charoenwong
  • Beng Soon Chong
  • Yung Chiang Yang

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.

Suggested Citation

  • Charlie Charoenwong & Beng Soon Chong & Yung Chiang Yang, 2014. "Asset Liquidity and Stock Liquidity: International Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(3-4), pages 435-468, April.
    • Handle: RePEc:bla:jbfnac:v:41:y:2014:i:3-4:p:435-468
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    File URL: http://hdl.handle.net/10.1111/jbfa.12052
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    Cited by:

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    4. David H. Downs & Bing Zhu, 2022. "Property market liquidity and REIT liquidity," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(6), pages 1462-1491, November.
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    6. Ze-To, Samuel Yau Man, 2016. "Asset liquidity and stock returns," Advances in accounting, Elsevier, vol. 35(C), pages 177-196.
    7. Huang, Winifred & Mazouz, Khelifa, 2018. "Excess cash, trading continuity, and liquidity risk," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 275-291.

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