TY - JOUR
T1 - Stock Liquidity and SMEs’ Likelihood of Bankruptcy
T2 - Evidence from the US Market
AU - El kalak, Izidin
AU - Azevedo, Alcino
AU - Hudson, Robert
AU - Abd Karim, Mohamad Nazri
PY - 2017/12
Y1 - 2017/12
N2 - We study the association between the stock liquidity of SMEs in the US and their likelihood of bankruptcy, using a dataset that comprises information on 5075 firms over the time period from 1984 to 2013 using the hazard model of Campbell et al. (2008). We find that less liquid stocks are associated with higher probability of bankruptcy, although there is substantial heterogeneity across industries regarding the predictive power of the liquidity measure on the likelihood of bankruptcy. Furthermore, the exchange where the SMEs are listed also affects the likelihood of bankruptcy. Classification performance tests conclude that adding a liquidity measure variable to the Campbell et al. (2008) model improves its predictive power.
AB - We study the association between the stock liquidity of SMEs in the US and their likelihood of bankruptcy, using a dataset that comprises information on 5075 firms over the time period from 1984 to 2013 using the hazard model of Campbell et al. (2008). We find that less liquid stocks are associated with higher probability of bankruptcy, although there is substantial heterogeneity across industries regarding the predictive power of the liquidity measure on the likelihood of bankruptcy. Furthermore, the exchange where the SMEs are listed also affects the likelihood of bankruptcy. Classification performance tests conclude that adding a liquidity measure variable to the Campbell et al. (2008) model improves its predictive power.
KW - Market liquidity
KW - Liquidity measures
KW - Bankruptcy
KW - Hazard model
UR - https://ssrn.com/abstract=3103777
UR - https://www.scopus.com/pages/publications/85024901830
U2 - 10.1016/j.ribaf.2017.07.077
DO - 10.1016/j.ribaf.2017.07.077
M3 - Article
SN - 0275-5319
VL - 42
SP - 1383
EP - 1393
JO - Research in International Business and Finance
JF - Research in International Business and Finance
ER -