Companies’ Internal Factors and Stock Liquidity: Evidence from the Baltic Markets

Rasa Norvaišienė, Jurgita Stankevičienė


The purpose of this paper is to investigate which internal factors of companies are most affecting stock liquidity in the markets of the Baltic countries. The authors of the paper investigated the dependence between the stock liquidity of Lithuanian, Latvian and Estonian companies and the company-level factors, such as size of a company, return on assets, liquidity of assets, financial leverage, profit/loss.
The research evidenced that the internal factors significantly impacted stock liquidity in the Baltic markets during the entire investigated period of 2005 – 2012, however this impact was less significant during the crisis and post-crisis period.


Baltic stock markets, corporate financial ratios, stock liquidity.

Full Text:



Acharya, V. V., Pedersen, L. H., “Asset pricing with liquidity risk,” Journal of Financial Economics, 2005, vol. 77, pp. 375–410.

Amihud, Y., “Illiquidity and stock returns: cross-section and time-series effects,” Journal of financial markets, 2002, vol. 5, no. 1, pp. 31–56.

Attig, A., Gadhoumm, Y., Lang, L. H. P., “Bid-ask spread, asymmetric information and ultimate ownership,” In: EFMA Conference, Helsinki, 2003.

Bekaer, G., Harvey, C. R., Lundblad, C., “Liquidity and expected returns: lessons from emerging markets,” The Review of the Financial Studies, 2007, vol. 20, no. 6, pp. 1783–1831.

Benić, V., Franić, I., “Stock Market Liquidity: Comparative Analysis of Croatian and Regional Markets,” Financial Theory and Practice, 2008, vol. 32, no. 4, pp. 477–498.

Brockman, P., Chung, D.Y., Perignon, C., “Commonality in liquidity: a global perspective,” Journal of Financial and Quantitative Analysis, 2009, vol. 44, no. 4, pp. 851–882.

Choi, W. G., Cook, D., “Stock Market Liquidity and the Macroeconomy: Evidence from Japan,” Monetary Policy under Very Low Inflation in the Pacific Rim, NBER-EASE, National Bureau of Economic Research, 2006, vol. 15, pp. 309–340.

Chordia, T., Shivakumar, L., Subrahmanyam, A., “Liquidity dynamics across small and large firms,” Economic Notes, 2004, vol. 33, pp. 111–143.

Fang, J., Sun, Q., Wang, C., “Illiquidity, Illiquidity Risk and Stock Returns: Evidence from Japan,” In: International Symposium on Econometric Theory and Applications (SETA), 2006.

Fernando, Ch. S., Herring, R. J., “Liquidity shocks, systemic risk, and market collapse: theory and application to the market for perps,” Journal of Banking & Finance, 2001, vol. 32, no. 8, pp. 1625–1635.

Frieder, L., Martell, R., “On capital structure and the liquidity of a firm‘s stock,” [Online], Working Paper, 2006. [Accessed 27.07.2014.]. Available: LFrieder.CapStructure-Liquidity04-06.pdf

Goyenko, R. Y., Holden, C. W., Trzcinka, C. A., “Do liquidity Measures Measure Liquidity?” Journal of Financial Economics, 2009, vol. 92, pp. 153–181.

Gopalan, R., Kadan, O., Pevzner, M., “Asset liquidity and stock liquidity,” Journal of Financial and Quantitative Analysis, vol. 1, no. 1, pp. 1–70.

Heflin, F., Shaw, K. W., Wild, J. J., “Disclosure policy and market liquidity: Impact of depth quotes and order sizes,” Contemporary Accounting Research, 2005, vol. 22, no. 4, pp. 829–866.

Jain, P. K., Kim, J., Rezaee, Z., “Trends and determinants of market liquidity in the pre- and post- Sarbanes-Oxley act periods,” In: 14th Annual Conference on Financial Economics and Accounting, 2005.

Jang, J., Kang, J., Lee, Ch., “Liquidity risk and expected stock returns in Korea: a new approach,” Asia-Pacific Journal of Financial Studies, 2012, vol. 41, no. 6, pp. 704–738.

Khediri, K. B., Daadaa, W. Stock trading and capital structure in Tunisian stock exchange. Journal of Business Studies, 2011, vol. 2, no. 2, pp. 10–24.

Laužikas, M., Krasauskas, A., “Impacts of sustainable structural growth on the economic performance of listed companies,” Entrepreneurship and Sustainability Issues, vol. 1, no. 2, pp. 81–91.

Lesmond, D. A., O`Connor, P. F., Senbet, L. W., “Capital structure and equity liquidity,” [Online], Robert H. Smith School Research Paper No. RHS 06-067. p. 52. [Accessed 27.07.2014.]. Available: abstract=1107660.

Lipson, M. L., Mortal, S., “Liquidity and capital structure,” Journal of Financial Markets, 2005, vol. 12, pp. 611–644.

Naes, R., Skjeltorp, J. A. Odegaard, B. A., “Stock market liquidity and the business cycle,” Journal of Finance, 2009, vol. 66, no. 1, pp. 139–176.

Plerou, V., Gopikrishnan, P., Stanley, H. E., “Quantifying fluctuations in market liquidity: analysis of the bid-ask spread,” Physical review, 2005, vol. 71, no. 4, pp. 1–8.

Prause, G., “A holistic concept for the sustainable evaluation of company shares,” Entrepreneurship and Sustainability Issues, 2014, vol. 2, no. 1, pp. 37–42.

Schwartz, R. A., Francioni, R., Equity markets in action. The fundamentals of liquidity, market structure and trading, John Wiley & Sohns, Hoboken, New Jersey, 2004. p. 480.

Tvaronavičienė, M., Šimelytė, A., Lace, N., “Sustainable development facets: exporting industrial sectors from inside,” Journal of Security and Sustainability Issues, 2014, vol. 3, no. 4, pp. 37–44.

DOI: 10.7250/eb.2014.023


  • There are currently no refbacks.

Copyright (c)