The Effect of Default Risk on Equity Liquidity When Expected Financial Distress Costs are High
| Autor: | Yu-Dan Chen, 陳禹丹 |
|---|---|
| Rok vydání: | 2005 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 93 This dissertation is to demonstrate the relation between default risk and equity liquidity. Market makers will widen spreads if the trading proportion of informed traders increases and uninformed traders exit market as firm’s financial performance deteriorates. Increased default probability usually concealed by managers will enlarge asymmetric information costs and thus market makers offer greater bid-ask spreads to protect their profit. Default risk measured by Merton’s option pricing model to investigate whether firms with financial distress possess higher bid-ask spreads. Furthermore, we take the panel threshold regression model to examine the possible non-linear relationship between default risk and equity liquidity. The result shows default risk observably has more significant and stronger relation to equity liquidity in the corporate scandal disaster period than usual time. We infer that results in corporate scandal and listed company bankruptcy events always lead to a chain reaction. The happenings of firm’s bankrupt and enormous dump of prices are generally clustered, in particular for the firms with deteriorating financial condition. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
| Externí odkaz: |
|