TY - JOUR
T1 - Stock liquidity and investment efficiency
T2 - Evidence from the split-share structure reform in China
AU - Cheung, William Ming Yan
AU - Im, Hyun Joong
AU - Selvam, Srinivasan
N1 - Publisher Copyright:
© 2023 Elsevier B.V.
PY - 2023/9
Y1 - 2023/9
N2 - Using China's split-share structure reform, we examined the effect of stock liquidity on investment efficiency. We found that enhanced stock liquidity results in more efficient investments and the effect is much more pronounced for under-investing firms than for over-investing firms. Additionally, we found that an increase in institutional ownership and price efficiency generated by a change in stock liquidity is positively associated with a reduction in under-investment. Thus, these findings suggest that under-investing firms with liquid stocks have more informed investors and face greater pressure to select an optimal investment level in the post-reform period.
AB - Using China's split-share structure reform, we examined the effect of stock liquidity on investment efficiency. We found that enhanced stock liquidity results in more efficient investments and the effect is much more pronounced for under-investing firms than for over-investing firms. Additionally, we found that an increase in institutional ownership and price efficiency generated by a change in stock liquidity is positively associated with a reduction in under-investment. Thus, these findings suggest that under-investing firms with liquid stocks have more informed investors and face greater pressure to select an optimal investment level in the post-reform period.
KW - Corporate governance
KW - Information efficiency
KW - Institutional ownership
KW - Investment efficiency
KW - Stock liquidity
UR - http://www.scopus.com/inward/record.url?scp=85164499387&partnerID=8YFLogxK
U2 - 10.1016/j.ememar.2023.101046
DO - 10.1016/j.ememar.2023.101046
M3 - Article
AN - SCOPUS:85164499387
SN - 1566-0141
VL - 56
JO - Emerging Markets Review
JF - Emerging Markets Review
M1 - 101046
ER -