Liquidity of the stock exchanges plays essential role on investment decisions and it is one of the factors that may influence on stock price. The easier one can buy/sell shares of a firm, the higher liquidity the firm has. In fact, lack of liquidity may lead investors to sell their assets at cheaper prices and it could influence negatively on overall market. The primary objective of this paper is to study the effect of stock liquidity on the risk of falling stock prices. The study chooses historical information of 70 selected firms listed on Tehran Stock Exchange over the period 2006-2012. The results of this survey have indicated that there was a negative and meaningful relationship between stock liquidity and stock price decline.
This paper presents an empirical investigation to study the effect of bank ownership concentration on capital adequacy and liquidity on 14 selected private Iranian banks located in city of Tehran, Iran. The study uses a linear regression model where ownership concentration is independent variable, size, leverage, growth domestic product and revenue growth are control variables and liquidity and capital adequacy are dependent variables. Using historical information over the period 2010-2013, the study has determined a negative and meaningful relationship between liquidity and ownership concentration. However, the study has determined a positive and meaningful relationship between capital adequacy and ownership concentration.
This paper examines the relationship between liquidity and quality of financial information by analyzing long-term trends in illiquidity measure for firms that restate their financial statements. The study uses a method developed by Amihud (2002) [Amihud, Y. (2002). Illiquidity and stock returns: cross-section and time-series effects. Journal of financial markets, 5(1), 31-56.]. The original sample consists of 98 listed firms in Tehran Stock Exchange over the period 2004-2011. In this study, the measurement of quality of financial information is associated with presence or absence of financial restatement cases. We find that for most income decreasing restatements illiquidity increases before restatement announcement and this increase continues after restatement announcement. Overall, our results indicate a positive relationship between quality of financial information and liquidity.
This paper presents an empirical investigation to study the effects of two macroeconomic factors; namely exchange rate and liquidity on stock index. The proposed study was applied in Iran and on major index of Tehran Stock Exchange over the period 2001-2011. They reported that the currency exchange maintained negative impact on stock exchange for the period of investigation. This is due to the fact that when currency devalued, working capital decreases and firms did not enough money to purchase raw materials, pay wages, etc. In addition, liquidity marinated a direct and positive relationship with exchange index. However, the impact of liquidity seems to be bigger than currency exchange.
Liquidity management in banks is a conflict between risk and return. On the one hand, the lack of liquidity, in addition to imposing heavy costs of providing resources (including borrowings from the central bank at elevated rates), may also lead banks to face with bankruptcy. On the other hand, the maintenance of excessive liquidity than needed will destroy investment opportunities and potential profitability. Therefore, for proper liquidity management, it is necessary to understand the factors affecting this sector to be able to exert control on each of the elements, and to prevent the incidence of problems or even crisis thereby optimize the bank profitability as far as possible. This study aimed to analyze the resources, expenses, and liquidity operating as the main activity parameters in Bank Shahr. During the study timeframe (2010 until the end of 2012), every 15 days was selected as the sample community, which were selected due to a 15-day trend analysis using census method and not by random sampling. The related data concerning each of the items, i.e. resources, expenses, and liquidity were collected and analyzed by linear regression based on time or periods of time. The above items were compared through analysis of the relative contribution to the total ratio and correlation analysis. The results showed that the growing trends of resources and expenses almost coincide and followed a specific trend and, in general, the growing trend of the resources was rising with a higher slope compared with those of expenses and liquidity. In addition, the growing trend of liquidity was almost identical throughout the entire period of study and no unusual trend was observed.
This study examines the relationship between corporate governance’s mechanisms and liquidity of stocks on 66 selected firms listed on Tehran Stock Exchange over the period 2005-2009. Board composition and ownership structure are used as corporate governance’s mechanisms and illiquidity measure proposed by Amihud (2002) [Amihud, Y. (2002). Illiquidity and stock returns: cross-section and time-series effects. Journal of financial markets, 5(1), 31-56.] is used to measure stock liquidity. The results show that an increase on the number of independent boards is associated with higher liquidity. In addition, the results show that there was a significant relationship between liquidity and ownership structure. In other words, the relationships between liquidity and individual investors and five biggest investors are positive and the relationships between liquidity and institutional ownership and the biggest investor ownership are negative. In addition, there is not a significant relationship between liquidity and duality of managers.
Measuring liquidity risk plays an important role on any business unit especially financial organizations. Social security systems in most countries around the world are responsible to provide necessary requirements in many countries such as health care, pension plans, etc. Therefore, it is necessary to reduce any risk associated with these systems as much as possible. In this paper, we study liquidity risk in Iranian social security using VaR technique. The proposed model of this paper uses historical information for a fiscal year of 2008-2011. We first divide the information of each year into two groups of first and second half and using VaR technique analyzed whether there was any trend change in these two groups. The results of our survey indicate that the mean of VaR in the second half of the year is greater than the first half of the year. Therefore, we can confirm that VaR maintains an increasing trend over the time horizon. We also study the trend in liquidity using regression analysis for each year, separately and the results of our survey confirm that there was an increasing trend in liquidity over time.
This paper presents an empirical investigation to determine whether or there is any difference between the returns of two value and growth portfolios, sorted by price-to-earnings (P/E) and price-to-book value (P/BV), in terms of the ratios of market sensitivity to index (β), firm size and market liquidity in listed firms in Tehran Stock Exchange (TSE) over the period 2001-2008. The selected firms were collected from those with existing two-consecutive positive P/E and P/BV ratios and by excluding financial and holding firms. There were five independent variables for the proposed study of this paper including P/E, P/B, market size, market sensitivity beta (β) and market liquidity. In each year, we first sort firms in non-decreasing order and setup four set of portfolios with equal firms. Therefore, the first portfolio with the lowest P/E ratio is called value portfolio and the last one with the highest P/E ratio is called growth portfolio. This process was repeated based on P/BV ratio to determine value and growth portfolios, accordingly. The study investigated the characteristics of two portfolios based on firm size, β and liquidity. The study has implemented t-student and Levin’s test to examine different hypotheses and the results have indicated mix effects of market sensitivity, firm size and market liquidity on returns of the firms in various periods.
In today’s environment, cash conversion cycle is randomly used as a measure of liquidity of the organizations. Cash conversion cycle is considered as the length of time between raw-materials and collection of cash from debtors. It can be used as a benchmarking competitors or comparing companies. On the other hand, Cash holding is one of the most important financial decisions that a manager has to make in any organization. Some organizations hold more cash and some organizations hold less cash. In this study, we perform a survey to make a relationship between Cash Conversion Cycle and Cash Holding.