Stock liquidity and investment opportunities: New evidence from FTSE 100 index deletions
AbstractThis paper examines the relationship between stock liquidity and investment opportunities in a sample of firms experiencing a negative exogenous liquidity shock, captured by deletion from the FTSE 100 stock index. We find no statistical association between stock liquidity and investment opportunities. These findings are in sharp contrast to the positive relation between liquidity and investment opportunities reported in US equity markets. This unique result in the London Stock Exchange suggests that deletion from a major stock index does not influence corporate investment decisions because there is no significant change in the cost of capital.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.
Volume (Year): 20 (2010)
Issue (Month): 3 (July)
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Web page: http://www.elsevier.com/locate/intfin
Stock liquidity Investment opportunities Index deletion London Stock Exchange;
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