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How does stock liquidity affect corporate cash holdings in Japan?: A pre-registered report

Author

Listed:
  • Fujitani, Ryosuke
  • Iwata, Kiyonori
  • Yasuda, Yukihiro

Abstract

This pre-registered report outlines a comprehensive plan for a paper aimed at examining the positive relationship between stock liquidity and corporate cash holdings within the context of Japan. This study aims to offer a novel explanation. Our explanation is rooted in the “dark side” of stock liquidity, suggesting that liquidity could exacerbate corporate financial constraints by increasing the stock price crash risk. If managers expect liquidity to cause the surge of the cost of external capital, they will have a precautionary motive to retain cash. We plan to examine whether stock liquidity positively affects corporate cash holdings in Japan. Furthermore, we plan to isolate our hypothesis from other possible explanations by assessing whether the positive liquidity-cash relationship is more pronounced in firms experiencing overvaluation.

Suggested Citation

  • Fujitani, Ryosuke & Iwata, Kiyonori & Yasuda, Yukihiro, 2024. "How does stock liquidity affect corporate cash holdings in Japan?: A pre-registered report," Pacific-Basin Finance Journal, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:pacfin:v:83:y:2024:i:c:s0927538x23002767
    DOI: 10.1016/j.pacfin.2023.102205
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    More about this item

    Keywords

    Corporate cash holding; Stock liquidity; Stock price crash risk;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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