Title: The impact of companies' internal factors on stock liquidity in Pakistan

Authors: Badal Khan; Muhammad Tahir; Abdul Majid Nasir; Muhammad Mushtaq

Addresses: Department of Management Science, Faculty of Economics, Commerce and Business Administration, University of Turbat, Baluchistan, Pakistan ' School of Management, University Sains Malaysia, 11800 Pulau Penang, Malaysia; Department of Management Science, Faculty of Economics, Commerce and Business Administration, University of Turbat, Baluchistan, Pakistan ' Department of Commerce, Faculty of Economics, Commerce and Business Administration, University of Turbat, Baluchistan, Pakistan ' Graduate School of Business, University Sains Malaysia, 11800 Pulau Penang, Malaysia; Department of Commerce, Faculty of Economics, Commerce and Business Administration, University of Turbat, Baluchistan, Pakistan

Abstract: This study aims to find out the impact of corporate internal factors on the stock liquidity of companies listed on Karachi Stock Exchange (KSE) Pakistan. The companies' financial factors, liquidity, leverage, activity, profitability, and valuation multiples, are taken as internal factors, while stock liquidity is measured by illiquidity ratio of Amihud. The study obtains five years' daily data from July 2010 to June 2015 of listed manufacturing firms from KSE. Only those firms are considered that close their financial year in June to avoid any periodical gap between share information and financial data. The regressed relationship of cross panel data is tested using panel least squares. The empirical results conclude that total assets turnover and profit margin are the financial factors that positively influence stock liquidity, whereas debt ratio and return on assets inversely influence stock liquidity. Moreover, the size of the corporation, liquidity (current ratio), market-book multiples, and price-earnings multiples are not significant to influence the stock liquidity.

Keywords: stock liquidity; illiquidity; leverage; profitability; price earnings multiple; price book multiple; Pakistan.

DOI: 10.1504/AAJFA.2019.102983

Afro-Asian Journal of Finance and Accounting, 2019 Vol.9 No.4, pp.459 - 473

Received: 31 Aug 2017
Accepted: 07 Mar 2018

Published online: 01 Oct 2019 *

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