Stock Liquidity, EmpireBuilding, and Valuation
发布时间: 2018-04-11 访问次数: 40


Stock Liquidity, EmpireBuilding, and Valuation


Prof. An YanFordham University, US, 2nd Jan,2018

Location:B-201,Building of Economics & Management, Jiulonghu Campus


We conjecture that high stock liquidity negatively affects firm valuationby inducing inefficient investment. We use takeovers of public targets to proxyfor the empire building motive. We find that the negative effect of stockliquidity on firm value from the empire building motive increases when a firmhas a higher likelihood to acquire a public target. When a public-targettakeover occurs, the negative effect dominates any positive effects of stockliquidity so that high stock liquidity destroys firm value. We also show that financialconstraint and corporate governance play roles in how stock liquidity affectsthe empire building motive.