Stock Market Liquidity and Firm Value- Indian Evidences

Abstract

This paper examined the relationship of stock market liquidity on the firm value of Indian manufacturing firms included in the S&P BSE 100 Index from 2009 to 2012. The random effects panel regression model has been invoked to analyze the relationship. The empirical results support the stock market liquidity implications of firm value, that is, better liquidity of stock of companies results in higher value of the firm. The empirical results put forth that there is a positive relationship between stock market liquidity as measured by Amivest measure (1985) and firm performance as measured by Tobin's Q.