Investigation relationship between stock liquidity, empire building and firms’ value

Subject Areas : Investments

Somayeh Najafy ¹ , Marzieh Ebrahimi Shaghaghi ² , Hossein Eslami Mofidabadi ³

1 - Department of Accounting and Management, Shahriar Branch, Islamic Azad University, Shahriar, Iran.
2 - Department of Accounting and Management, Shahriar Branch, Islamic Azad University, Shahriar, Iran.
3 - Department of Accounting and Management, Shahriar Branch, Islamic Azad University, Shahriar, Iran.

Received: 2023-07-21 Accepted : 2024-06-04 Published : 2024-06-04

Keywords: Empire Building, Firms’ Valuation, Liquidity,

Abstract :

Objective: This study aims to examine the relationship between stock liquidity, managerial entrenchment, and firm value for companies listed on the Tehran Stock Exchange. Stock liquidity is a critical issue in capital markets for both individual and institutional investors. Analyzing its impact on various metrics, including managerial entrenchment and firm value, has been a topic of discussion among many financial and investment scholars.

Methodology: Data were collected from the Tehran Stock Exchange database and library research. The study employs multivariate regression analysis using panel data structured as company-years. To evaluate the research objective, two main hypotheses and three sub-hypotheses were formulated and tested at a 0.05 significance level.

Findings: Results from testing the first general hypothesis indicate a significant relationship between stock liquidity and measures of asset growth, as well as growth in property, plant, and equipment. Findings from the second general hypothesis demonstrate that stock liquidity has a significant effect on firm value.

Originality/Value: The innovation of this research lies in the application of the novel concept of managerial entrenchment, calculating this variable using three explanatory indicators, and examining its relationship with firm value and stock liquidity.

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