Abstract
The COVID-19 outbreak badly hits worldwide economies by disrupting supply and demand. These disruptions negatively affect sales and make firms to face cash-flow insolvency threats. Hence, this paper examines if good liquidity management help to mitigate adverse reactions of stock prices to the COVID-19 crisis. Analyses highlight that firms with a high liquidity risk experience a decrease in their cumulative average abnormal return, which is more severe than low-liquidity-risk firms do. Also, firms with a high cash ratio do not appear to face cash-flow insolvency threats in this pandemic. Hence, their stock price does not experience a significant decrease, or their cumulative average abnormal return is not statistically different from zero.
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Appendix: Checking Convergence of MCMC of Parameter Estimates
Appendix: Checking Convergence of MCMC of Parameter Estimates
The displayed diagnostics include a trace plot, an autocorrelation plot, a histogram, and a kernel density estimate overlaid with densities estimated using the first and the second halves of the MCMC sample.
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Nguyen, L.D. (2022). Liquidity Management and Stock Price Reactions in an Economic Crisis. In: Ngoc Thach, N., Ha, D.T., Trung, N.D., Kreinovich, V. (eds) Prediction and Causality in Econometrics and Related Topics. ECONVN 2021. Studies in Computational Intelligence, vol 983. Springer, Cham. https://doi.org/10.1007/978-3-030-77094-5_18
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DOI: https://doi.org/10.1007/978-3-030-77094-5_18
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