Stock Liquidity and Firm Value in the Time of COVID-19 Pandemic

ABSTRACT

This paper investigates the impact of stock liquidity on firm value in the time of COVID-19 pandemic. Using data from A-share listed companies in China, we calculate the firm value of Cumulative Abnormal Returns through the event study method and stock liquidity by the Amihud illiquidity. We find that significant negative relationships between stock liquidity and firm value exist in the first three days of the COVID-19 outbreak, while significant positive relationships in the following days. We also find that these negative relationships are more significant in severely impacted regions, small companies, and non-state-owned enterprises.

KEYWORDS:

• Covid-19 pandemic
• stock liquidity
• firm value
• sate-owned enterprises

JEL:

• G10
• G14
• G32
• D21

Acknowledgments

We acknowledge the helpful comments from editors and two anonymous reviewers. All errors are our own.

Declaration Of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Additional information

Funding

The paper is supported by National Social Science Foundation of China and Grant Number 15BJL077.