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Political uncertainty and commonality in liquidity

Author

Listed:
  • Dang, Tung Lam
  • Luong, Hoang
  • Nguyen, Lily
  • Nguyen, My

Abstract

We examine whether political uncertainty affects commonality in liquidity worldwide. Using national elections as a proxy for political uncertainty across 40 countries over 2000–2019, we document a positive effect of political uncertainty on commonality in liquidity. This effect is stronger for firms with greater institutional ownership but weaker for those headquartered in countries with greater checks and balances and government stability, more market-friendly incumbent governments, and better institutional structures. Our findings support both the demand- and supply-side sources of liquidity as channels through which political uncertainty affects commonality in liquidity.

Suggested Citation

  • Dang, Tung Lam & Luong, Hoang & Nguyen, Lily & Nguyen, My, 2024. "Political uncertainty and commonality in liquidity," Pacific-Basin Finance Journal, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:pacfin:v:83:y:2024:i:c:s0927538x23003207
    DOI: 10.1016/j.pacfin.2023.102249
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    More about this item

    Keywords

    Political uncertainty; National elections; Commonality in liquidity; International markets; Market volatility;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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