Stock Liquidity and Firm Value: Evidence from a Policy Experiment in India

Autor:	Mohammad Shameem Jawed, Kiran Kumar Kotha
Rok vydání:	2018
Předmět:	Economics and Econometrics 050208 finance Natural experiment 05 social sciences Enterprise value Monetary economics Stock liquidity Causality Intervention (law) 0502 economics and business Value (economics) Business 050207 economics Security market Listing (finance) Finance
Zdroj:	International Review of Finance. 20:215-224
ISSN:	1468-2443 1369-412X
DOI:	10.1111/irfi.12200
Popis:	The Indian securities market regulator intervened in June 2010 with a regulatory amendment in the listing requirement that mandated all the listed firms other than PSUs (government‐owned companies) to have a minimum public shareholding of 25%. The affected firms were given a 3‐year window to comply with the regulation. This study examines the impact of the new regulation on the affected firms’ value. We explore the relationship between improvement in firms’ value and stock liquidity. This regulatory intervention offers a natural experiment to examine direct causality between stock liquidity and firms’ value. The findings of the empirical analysis confirm the existence of a direct causal relationship between stock liquidity and firm value, stemming from an improved operating performance.
Databáze:	OpenAIRE
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