Market Liquidity and Default Risk
Date Issued
2014
Date
2014
Author(s)
Lee, Kuang-Hsuan
Abstract
Using the data of Taiwan’s listed firms, this thesis empirically investigates whether market liquidity variables provide valuable information for predicting corporate financial distress. It finds that, after controlling the variables documented in the literature, the growth rate of a stock’s trading volumes still has prediction power on financial distress. The higher the growth rate of trading volumes, the lower the probabilities that a firm will become financially distressed within one year.
One possible explanation for this result is that information asymmetry increases as a firm’s credit risk becomes higher, so investors are more reluctant to trade the firm’s stock. Also, the reduction in market liquidity may raise the firm’s funding costs, then increase its credit risk.
Subjects
流動性
市場
信用風險
違約風險
Type
thesis
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