Stock liquidity and investment efficiency: Evidence from the split-share structure reform in China

William Ming Yan Cheung, Hyun Joong Im, Srinivasan Selvam

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

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.

Original languageEnglish
Article number101046
JournalEmerging Markets Review
Volume56
DOIs
StatePublished - Sep 2023

Keywords

  • Corporate governance
  • Information efficiency
  • Institutional ownership
  • Investment efficiency
  • Stock liquidity

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