An investigation of stock market liquidity, ownership, and capital structure choices using Panel VAR

Subject Areas : Financial engineering

zahra ghorbani ¹ , alireza daghighiasli ² , marjan damankeshideh ³ , roya seifipour ⁴ , hooshang momeni vesalian ⁵

1 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
3 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
4 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
5 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran

Received: 2021-04-27 Accepted : 2021-06-09 Published : 2021-12-22

Keywords: Capital Structure, ownership, Stock market liquidity, Panel VAR,

Abstract :

This research investigates stock market liquidity, ownership, and choices of capital structure using the Panel VAR model for 50 companies listed in the stock exchange over 2013-2019. According to the results of Panel VAR estimates, a one standard deviation shock to ownership structure caused the capital structure to increase in terms of companies’ debts, and this effect continued by increasing debts. Also, after some periods, the impact of the shock to corporate ownership structure on capital structure in terms of debts achieved its highest point and was followed by a decreasing trend..Analysis of variance showed that 0.03% of the impacts were caused by shocks in ownership structure, 0.5% was related to liquidity shocks, 0.09% was related to shocks in the corporate size, 0.005% was related to shocks in sale growth rate, 0.02% was related to shocks in fair value of assets, 0.08% was related to shocks in profitability, 0.51% was due to shocks in the consumer price index, and 3.93% was related to shocks in exchange rate volatility. Among the variables considered, exchange rate volatility, inflation, liquidity, and ownership structure, respectively, had the most impact on the capital structure for companies listed in the stock exchange over annual periods.