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    Managerial Decisions, Asset Liquidity, and Stock Liquidity

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    SSRN-id1342706.pdf (383.8Kb)
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    https://www.researchgate.net/profile/Radhakrishnan_Gopalan/publication/228289664_Managerial_Decisions_Asset_Liquidity_and_Stock_Liquidity/links/00b7d519cb677ae9b4000000/Managerial-Decisions-Asset-Liquidity-and-Stock-Liquidity.pdf
    Permanent Link
    10.2139/ssrn.1342706
    http://hdl.handle.net/11603/4271
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    Author/Creator
    Gopalan, Radhakrishnan
    Kadan, Ohad
    Pevzner, Mikhail
    Date
    2009
    Type of Work
    44 pages
    Text
    journal articles
    Citation of Original Publication
    Gopalan, Radhakrishnan and Kadan, Ohad and Pevzner, Mikhail, Managerial Decisions, Asset Liquidity, and Stock Liquidity (February 2009). EFA 2009 Bergen Meetings Paper.
    Abstract
    We predict a positive relationship between the liquidity of the firm's assets and the liquidity of its stock. This relationship depends on market expectations regarding the deployment of the firm's liquid assets. Thus our hypothesis links stock liquidity to managerial actions that change the liquidity of the firm's assets, such as investment, financing, and payout. Consistent with our prediction, we find that after controlling for firm fixed effects, a one standard deviation increase in asset liquidity increases stock liquidity by 14.5%. The relation is stronger when the manager is less likely to convert liquid assets into illiquid assets such as for low market to book and low capital expenditure firms, during economic recessions, and when expected payout is high. Apart from linking corporate finance decisions to stock liquidity, the analysis also promotes a new rationale for several empirical regularities such as the commonality in stock liquidity, and the improvement in stock liquidity following equity issuances.


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    Robert L. Bogomolny Library
    University of Baltimore
    1420 Maryland Ave.
    Baltimore, MD 21201
    Email: knowledgeworks@ubalt.edu


    If you wish to submit a copyright complaint or withdrawal request, please email mdsoar-help@umd.edu.