Stock Liquidity, Investment Efficiency, and Firm's Performance: Evidence from Tehran Stock Exchange

Subject Areas : Journal of Investment Knowledge

Heidar Foroughnejad ¹ , Mohsen Moradi Joz ² , Hossein Heidari ³ , Ghader Masoumi Khanghah ⁴

1 - آموزشکده فنی وحرفه‌ای سما،دانشگاه آزاداسلامی،واحداندیشه،اندیشه،ایران
2 - دانشجوی دکتری حسابداری دانشگاه تهران
3 - دانشجوی کارشناسی ارشد مدیریت مالی دانشگاه تهران
4 - (دانشجوی دکتری حسابداری و کارشناس سازمان بورس و اوراق بهادار

Received: 2015-09-09 Accepted : 2015-12-15 Published : 2016-06-21

Keywords: stock liquidity, Investment Efficiency, Firm's Performance, and Tobins'Q model,

Abstract :

This study investigates the relationship between stock liquidity, investment efficiency, and firm's performance in Tehran Stock Exchange. In this study, three criteria including trading volume ratio, the bid ask spread, and Amihud's stock liquidity ratio are used to quantify stock liquidity. Moreover, the model of Biddle et al and that of Tobins'Q are applied to determine investment efficiency and firms's performance, respectively. In so doing, the data of 115 firms listed in Tehran Stock Exchange for the period between 1387 and 1391 was collected and tested by using the multi-variable regression model based on panel data. The experimental results indicate that the first research hypothesis- the significantly positive impact of stock liquidity on investment efficiency- is statistically confirmed in a way that stock liquidity leads to investment efficiency. In addition, the investment efficiency results in an increase in firm's performance. The results also show that the bid ask spread criterion is of more effective and explanatory power than those of trading volume and Amihud's stock liquidity.

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