Abstract
We examine the relationship between funding liquidity and stock market liquidity. Positive (negative) funding liquidity shocks enhance market liquidity for medium-sized (large and small) firms before Korea adopts the Basel III accord, whereas changes in funding liquidity, in general, precedes changes in market liquidity afterward. The regime-dependent relationship is attributed to the change in domestic individuals’ reaction to funding liquidity shocks. Domestic investors act as liquidity providers for the overall market as funding liquidity improves, while foreigners only trade shares of small firms in response to funding liquidity shocks.
| Original language | English |
|---|---|
| Article number | 102734 |
| Journal | Finance Research Letters |
| Volume | 47 |
| DOIs | |
| State | Published - Jun 2022 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 9 Industry, Innovation, and Infrastructure -
SDG 10 Reduced Inequalities
Keywords
- Basel III
- Funding liquidity
- Investor type
- Stock market liquidity
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