The Impact On The Firm Value By Stock Market Liquidity In Chinese A-Share Market

This paper studies the stock market liquidity and firm value relationship. With the formulation of the theory of liquidity premium, scholars increasingly concerned about liquidity on the stock prices. Related research has focused on proof of the liquidity of the stock market expected returns of the stock. We find little research on the impact of liquidity on the value of the company in Chinese A share stock market. Therefore, this paper studies foreign scholars in the Fang(2009) of the relationship between liquidity and firm value based on the model, the introduction of turnover as flow of the measure, from the breadth and depth of liquidity of the two dimensions of the starting analyzes the liquidity of the stock market value of the company. In order to further study how mobility affect the company value, we measure the value of the company's Tobin'Q broken down into three financial indicators: return on net assets, financial leverage, return on assets. Mobility were studied how the impact of the three measures of company value.In this paper, China's Shanghai and Shenzhen A-share market listed companies in 2005-2009, a total of 5935 samples of data for the study, through the improvement of Fang(2009) model, empirical study of liquidity of our stock market value of the company. This sample selected in the time span that contains a complete stock market cycles, through the system analyzes whether China's stock market liquidity impact on the value of the company, and under what circumstances the value of mobility have a positive impact on the company, in what circumstances have a negative impact. Research shows that China's stock market liquidity and the relationship between corporate value by the stock market fluctuations. Embodied in, prices in the stock market in the stage of stock market liquidity and firm value negatively correlated, while stock prices in 2008, a significant downturn, stock market liquidity and firm value is positively correlated. Studies have shown that imperfect capital market development in China because of China's stock market value of the company can not be very good response, which makes our results and findings of Fang(2009) opposite in many years. By studying the mobility and other indicators of the relationship between firm performance, we find that the main impact on liquidity of the company's financial leverage.Finally, according to the conclusions of this study, we believe that departments should develop policies to promote the healthy development of institutional investors. And further based on our research results, when investors made investment decisions, they should consider the impact of liquidity factors.