The Role of Financial crises in the impact of Liquidity on Stock Returns: Empirical evidence from Tehran Stock Exchange (TSE)

Subject Areas : Computational economics

Ehsan Rajabi ¹ ( Assistant professor of Agricultural economics in Agricultural planning, Economic and Rural Development Research Institute (APERDRI), Ministry of Jihad-e Agriculture, Tehran , Iran )

Received: 2022-08-09 Accepted : 2022-09-18 Published : 2022-08-23

Keywords: Economic Growth, Stock Return, Liquidity, financial crisis, bankrupt companies,

Abstract :

The possibility of financial crises in the recent years is more than ever during the development of financial markets. In the last two decades, economic figures and financial statements show an unprecedented increase in corporate bankruptcies. The financial crisis can spread to financial markets and play role for impact of liquidity on stock. In this paper, we investigate the effect of liquidity on stock returns by using panel data method for 177 listed companies on the Tehran Stock Exchange in the period of 2007-2020.The results indicate that liquidity during the global financial crisis does not have a significant effect on share returns. In bankrupt companies, share returns have also increased by liquidity has increased. In other words, by increasing the share liquidity of the bankrupt companies, share returns will be increased. All so, when economic growth (year 2007, 2012, 2013, 2015, 2018, 2019) is negative, liquidity affect returns pasetively. The development of new financial instruments such as investment funds will increase the liquidity of stocks and, of course, increase stock returns, which will ultimately improve the development of the capital market for attracting liquidity and micro-capital of society to this financial market.