Stock liquidity and SMEs’ likelihood of bankruptcy:evidence from the US market

Abstract

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.

Publication DOI: https://doi.org/10.1016/j.ribaf.2017.07.077
Divisions: College of Business and Social Sciences > Aston Business School
College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
College of Business and Social Sciences > Aston Business School > Centre for Personal Financial Wellbeing
Additional Information: © 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: market liquidity,liquidity measures,bankruptcy,hazard model
Publication ISSN: 0275-5319
Last Modified: 13 May 2024 07:17
Date Deposited: 25 Jul 2017 10:20
Full Text Link:
Related URLs: https://www.sci ... 5062?via%3Dihub (Publisher URL)
PURE Output Type: Article
Published Date: 2017-12-01
Published Online Date: 2017-07-08
Accepted Date: 2017-07-03
Authors: El Kalak, Izidin
Azevedo, Alcino (ORCID Profile 0000-0002-4751-6085)
Hudson, Robert
Karim, Mohamad Abd

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