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The Effect of Stock Liquidity on Default Risk: An Empirical Study of China’s Capital Market

  • Kun Li
  • Qinqin YanEmail author
  • Yu Lei
Conference paper
Part of the Advances in Intelligent Systems and Computing book series (AISC, volume 1002)

Abstract

This study examines a sample of listed firms in the Chinese equity market and explores the relationship between stock liquidity and firm default risk. The empirical results of this study are as follows: (1) There is a significant negative correlation between the stock liquidity and default risk of listed companies. Additionally, for companies with a high risk of default, the effect of reducing the risk of default caused by stock liquidity is more pronounced. (2) The implementation of margin trading policies significantly improves stock liquidity and reduces firm default risk.

Keywords

Stock liquidity Corporate debt default Margin trading policy PSM-DID Capital markets 

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.School of BusinessSichuan UniversityChengduPeople’s Republic of China

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