Abstract This study investigates whether and how stock liquidity affects firms’ leverage decisions. Results show that higher stock liquidity significantly reduces a firm's excess leverage by alleviating information asymmetry and… Click to show full abstract
Abstract This study investigates whether and how stock liquidity affects firms’ leverage decisions. Results show that higher stock liquidity significantly reduces a firm's excess leverage by alleviating information asymmetry and amplifying the blockholders’ threats to exit. The results are robust when using various measures of stock liquidity and excess leverage, and when controlling for potential endogeneity problems.
               
Click one of the above tabs to view related content.