Stock liquidity and SMEs’ likelihood of bankruptcy: evidence from the US market

Izidin El Kalak, Alcino Azevedo, Robert Hudson, Mohamad Abd Karim

Research output: Contribution to journalArticle

Abstract

We study the association between the stock liquidity of SMEs in the US and their likelihood of bankruptcy, using a dataset that comprises information on 5075 firms over the time period from 1984 to 2013 using the hazard model of Campbell et al. (2008). We find that less liquid stocks are associated with higher probability of bankruptcy, although there is substantial heterogeneity across industries regarding the predictive power of the liquidity measure on the likelihood of bankruptcy. Furthermore, the exchange where the SMEs are listed also affects the likelihood of bankruptcy. Classification performance tests conclude that adding a liquidity measure variable to the Campbell et al. (2008) model improves its predictive power.
Original languageEnglish
Pages (from-to)1383-1393
JournalResearch in International Business and Finance
Volume42
Early online date8 Jul 2017
DOIs
Publication statusPublished - 1 Dec 2017

Bibliographical note

© 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • market liquidity
  • liquidity measures
  • bankruptcy
  • hazard model

Fingerprint Dive into the research topics of 'Stock liquidity and SMEs’ likelihood of bankruptcy: evidence from the US market'. Together they form a unique fingerprint.

  • Cite this