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Stock Liquidity and Firm Value: Evidence from a Policy Experiment in India
, Mohammad Shameem Jawed
Published in Wiley
2018
Volume: 20
   
Issue: 1
Pages: 215 - 224
Abstract
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.
About the journal
JournalData powered by TypesetInternational Review of Finance
PublisherData powered by TypesetWiley
ISSN1369-412X
Open AccessNo