The Moderating Influence of Corporate Debt on the Relationship between Free-Floating Shares and Stock Market Liquidity: Is the Effect Asymmetric? (July 1, 2021)

Mohammad Al-Shboul; Sajid Anwar; Aktham Issa Maghyereh

doi:10.2139/ssrn.4192984

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The Moderating Influence of Corporate Debt on the Relationship between Free-Floating Shares and Stock Market Liquidity: Is the Effect Asymmetric? (July 1, 2021)

Mohammad Al-Shboul, Sajid Anwar and Aktham Issa Maghyereh

Social Science Research Network (SSRN) , Vol.26 August 2022

Elsevier

2022

DOI: https://doi.org/10.2139/ssrn.4192984

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Abstract

corporate debt

stock liquidity

free-floating shares

financial crisis

coporate governance

asymmetric effect

The question of whether corporate debt can impact free-floating shares and stock liquidity is still a controversial research topic until recently. Using a sample of the 411 largest US non-financial firms over the period 2007-2017, our analysis shows that more corporate debt weakens the influence of free-floating shares on stock liquidity; contradicting the capital and ownership structures theory. Firms with higher corporate debt use lesser free-floating shares. We also show that stock liquidity asymmetrically responds to low and high corporate debt as well as to low and high free-floating shares. The global financial crisis (GFC) of 2007-2008 had a higher influence on weakening the relationship between corporate debt (or free-floating shares) and stock liquidity compared to the oil price crash (OPC) of 2014-2016. This paper serves as a guide to managers and market participants in assessing the reliance on corporate debt and free-floating shares in influencing stock market liquidity.

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Title: The Moderating Influence of Corporate Debt on the Relationship between Free-Floating Shares and Stock Market Liquidity: Is the Effect Asymmetric? (July 1, 2021)
Authors: Mohammad Al-Shboul (Corresponding Author) - University of Sharjah
Sajid Anwar (Author) - University of the Sunshine Coast, Queensland, Indigenous and Transcultural Research Centre - Legacy
Aktham Issa Maghyereh (Author) - United Arab Emirates University
Publication details: Social Science Research Network (SSRN) , Vol.26 August 2022
Publisher: Elsevier
DOI: 10.2139/ssrn.4192984
ISSN: 1556-5068
Organisation Unit: Indigenous and Transcultural Research Centre; School of Business and Creative Industries; University of the Sunshine Coast, Queensland
Language: English
Record Identifier: 99666697902621
Output Type: Preprint

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