Stock Liquidity and Firm Value: The Mediating Role of Capital Structure
Despite the substantial volume of research on the direct relationship between stock liquidity and firm value, no agreement has been reached on this nexus. This relationship may be influenced by some other intervening factors which have not been captured in the empirical studies. The present study ai...
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| Format: | Article |
| Language: | English |
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Faculty of Management & Finance, University of Colombo
2023-12-01
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| Series: | Colombo Business Journal |
| Subjects: | |
| Online Access: | https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2023/12/3.-CBJ-2022-V14I2-Stock-Liquidity-and-Firm-Value.pdf |
| _version_ | 1797372871493812224 |
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| author | Tutun Mukherjee Shubha Ranjan Dutta Som Sankar Sen |
| author_facet | Tutun Mukherjee Shubha Ranjan Dutta Som Sankar Sen |
| author_sort | Tutun Mukherjee |
| collection | DOAJ |
| description | Despite the substantial volume of research on the direct relationship between stock liquidity and firm value, no agreement has been reached on this nexus. This relationship may be influenced by some other intervening factors which have not been captured in the empirical studies. The present study aims to explore the link between stock liquidity and firm value and empirically tests the mediating role of capital structure on this relationship in the Indian context. Using sample data from 97 National Stock Exchange (NSE) listed top non-financial firms from 2010 to 2019 and adopting the Baron and Kenny approach, the results show that higher stock liquidity leads to a greater firm value. Furthermore, firms with liquid stocks are found to have significantly lower leverage. The results also confirm that capital structure fully mediates the relationship between stock liquidity and firm value. The empirical findings have important managerial implications when it comes to devising policies to maximise firms’ value. |
| first_indexed | 2024-03-08T18:42:05Z |
| format | Article |
| id | doaj.art-8565ab480f504c529fc15a0ef21030df |
| institution | Directory Open Access Journal |
| issn | 1800-363X 2579-2210 |
| language | English |
| last_indexed | 2024-03-08T18:42:05Z |
| publishDate | 2023-12-01 |
| publisher | Faculty of Management & Finance, University of Colombo |
| record_format | Article |
| series | Colombo Business Journal |
| spelling | doaj.art-8565ab480f504c529fc15a0ef21030df2023-12-29T05:24:16ZengFaculty of Management & Finance, University of ColomboColombo Business Journal1800-363X2579-22102023-12-01142579810.4038/cbj.v14i2.158Stock Liquidity and Firm Value: The Mediating Role of Capital StructureTutun Mukherjee0https://orcid.org/0000-0002-6714-1073Shubha Ranjan Dutta1Som Sankar Sen2Xavier Business School, St. Xavier’s University, IndiaDepartment of Commerce, Shibpur Dinobundhoo Institution, IndiaDepartment of Commerce, The University of Burdwan, IndiaDespite the substantial volume of research on the direct relationship between stock liquidity and firm value, no agreement has been reached on this nexus. This relationship may be influenced by some other intervening factors which have not been captured in the empirical studies. The present study aims to explore the link between stock liquidity and firm value and empirically tests the mediating role of capital structure on this relationship in the Indian context. Using sample data from 97 National Stock Exchange (NSE) listed top non-financial firms from 2010 to 2019 and adopting the Baron and Kenny approach, the results show that higher stock liquidity leads to a greater firm value. Furthermore, firms with liquid stocks are found to have significantly lower leverage. The results also confirm that capital structure fully mediates the relationship between stock liquidity and firm value. The empirical findings have important managerial implications when it comes to devising policies to maximise firms’ value.https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2023/12/3.-CBJ-2022-V14I2-Stock-Liquidity-and-Firm-Value.pdfstock liquidityfirm valuecapital structuremediating roleindia |
| spellingShingle | Tutun Mukherjee Shubha Ranjan Dutta Som Sankar Sen Stock Liquidity and Firm Value: The Mediating Role of Capital Structure Colombo Business Journal stock liquidity firm value capital structure mediating role india |
| title | Stock Liquidity and Firm Value: The Mediating Role of Capital Structure |
| title_full | Stock Liquidity and Firm Value: The Mediating Role of Capital Structure |
| title_fullStr | Stock Liquidity and Firm Value: The Mediating Role of Capital Structure |
| title_full_unstemmed | Stock Liquidity and Firm Value: The Mediating Role of Capital Structure |
| title_short | Stock Liquidity and Firm Value: The Mediating Role of Capital Structure |
| title_sort | stock liquidity and firm value the mediating role of capital structure |
| topic | stock liquidity firm value capital structure mediating role india |
| url | https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2023/12/3.-CBJ-2022-V14I2-Stock-Liquidity-and-Firm-Value.pdf |
| work_keys_str_mv | AT tutunmukherjee stockliquidityandfirmvaluethemediatingroleofcapitalstructure AT shubharanjandutta stockliquidityandfirmvaluethemediatingroleofcapitalstructure AT somsankarsen stockliquidityandfirmvaluethemediatingroleofcapitalstructure |