Stock Liquidity and Firm Value Evidence from Automobile Sector of Pakistan

Tahir M

Published on: 2020-03-31

Abstract

This research studies the stock liquidity impact on firm value of Automobile assembler industry of Pakistan. We have applied Pooled Ordinary Least Square regression method on the financial data of Automobile assembler sector of Pakistan over the period 2004-2018. This paper fills the gap in Pakistani Automobile assembler sector literature by providing latest evidence on impact of stock liquidity on firm value by using to-date available data. The liquidity, which is our main independent variable, shows positive and highly significant relationship with firm value. If firm’s stocks are liquid in nature, these can be sold in market at any time without any delay and firm can generate enough capital to fulfil its financial needs. Investors trade the shares more aggressively when stocks are more liquid, which in results, improved firm’s value and relax the financial constraints. The empirical results show leverage and size have negative affect on the firm value of Pakistani Automobile assembler sector.