The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange
Maximising firm value remains a key tenet of corporate managers. Firms with lower illiquidity and volatility attract lower risk premiums, and these are associated with a lower cost of capital and higher firm value. Internationalisation is one avenue purported to provide liquidity and volatility bene...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
AOSIS
2018-04-01
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| Series: | Journal of Economic and Financial Sciences |
| Subjects: | |
| Online Access: | https://jefjournal.org.za/index.php/jef/article/view/161 |
| _version_ | 1818340417667596288 |
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| author | Kudakwashe J. Chipunza Kerry McCullough |
| author_facet | Kudakwashe J. Chipunza Kerry McCullough |
| author_sort | Kudakwashe J. Chipunza |
| collection | DOAJ |
| description | Maximising firm value remains a key tenet of corporate managers. Firms with lower illiquidity and volatility attract lower risk premiums, and these are associated with a lower cost of capital and higher firm value. Internationalisation is one avenue purported to provide liquidity and volatility benefits – possibly lowering both liquidity and volatility risk premiums. This study investigated whether South African domiciled stocks experience a surge in liquidity and/or decline in volatility subsequent to internationalisation. The findings show that internationalisation resulted in a surge in liquidity, and this increase was persistent as suggested by the trading volume and Amihud illiquidity measures of stock liquidity; however, the turnover measure indicated that such liquidity gains were temporary. Similarly, volatility declines after internationalisation were temporary. There was inconclusive evidence to show that internationalised stocks had higher liquidity relative to purely domestic shares, and no statistically significant difference between the volatility of internationalised and purely domestic shareholders’ equity was noted. There is only weak evidence to support internationalisation as a route for lowering cost of capital via a reduction in the liquidity risk premium. |
| first_indexed | 2024-12-13T15:42:34Z |
| format | Article |
| id | doaj.art-04b713a996024aa499ba93f40d24c088 |
| institution | Directory Open Access Journal |
| issn | 1995-7076 2312-2803 |
| language | English |
| last_indexed | 2024-12-13T15:42:34Z |
| publishDate | 2018-04-01 |
| publisher | AOSIS |
| record_format | Article |
| series | Journal of Economic and Financial Sciences |
| spelling | doaj.art-04b713a996024aa499ba93f40d24c0882022-12-21T23:39:48ZengAOSISJournal of Economic and Financial Sciences1995-70762312-28032018-04-01111e1e1110.4102/jef.v11i1.161155The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock ExchangeKudakwashe J. Chipunza0Kerry McCullough1Department of Accounting, Economics and Finance, University of KwaZulu-NatalDepartment of Accounting, Economics and Finance, University of KwaZulu-NatalMaximising firm value remains a key tenet of corporate managers. Firms with lower illiquidity and volatility attract lower risk premiums, and these are associated with a lower cost of capital and higher firm value. Internationalisation is one avenue purported to provide liquidity and volatility benefits – possibly lowering both liquidity and volatility risk premiums. This study investigated whether South African domiciled stocks experience a surge in liquidity and/or decline in volatility subsequent to internationalisation. The findings show that internationalisation resulted in a surge in liquidity, and this increase was persistent as suggested by the trading volume and Amihud illiquidity measures of stock liquidity; however, the turnover measure indicated that such liquidity gains were temporary. Similarly, volatility declines after internationalisation were temporary. There was inconclusive evidence to show that internationalised stocks had higher liquidity relative to purely domestic shares, and no statistically significant difference between the volatility of internationalised and purely domestic shareholders’ equity was noted. There is only weak evidence to support internationalisation as a route for lowering cost of capital via a reduction in the liquidity risk premium.https://jefjournal.org.za/index.php/jef/article/view/161internationalisationliquidityvolatilityJSE |
| spellingShingle | Kudakwashe J. Chipunza Kerry McCullough The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange Journal of Economic and Financial Sciences internationalisation liquidity volatility JSE |
| title | The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange |
| title_full | The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange |
| title_fullStr | The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange |
| title_full_unstemmed | The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange |
| title_short | The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange |
| title_sort | impact of internationalisation on stock liquidity and volatility evidence from the johannesburg stock exchange |
| topic | internationalisation liquidity volatility JSE |
| url | https://jefjournal.org.za/index.php/jef/article/view/161 |
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