Research On Factors Influencing Liquidity Of New Three Board

New Three Board provides a platform for stocks' distribution and circulation of innovative and developing startups companies.Since its startup,New Three Board has expanded twice.The system is gradually refined by bringing in some new institutions such as the market making rule and market layering,which gives itself the title China's Nasdaq.The low entry barrier attracts many small enterprises and there are more and more of them applying for listing on New Three Board.However,this market has been in a condition of lacking liquidity for a long time.Many companies rarely made a transaction in history.Lack of liquidity not only hinders turnover of listed companies' shares,it makes these companies' fund-raising more difficult at the same time,which weakens New Three Board's function in helping small companies' financing.This article analyzed the reason of New Three Board's lack of liquidity from two perspectives,the whole market and the companies themselves.The most important factor from the whole market perspective that lead to low liquidity is the high entry barrier,especially the strict rule that individual investors can have access to the market only when their securities assets are more than 5 million RMB.Besides,lack of variety of institutional investors is another reason of small size of transaction party.Others factors from the market perspective including the high ownership concentration,the low quality of listing companiescaused by low entry standard,lack of auction trading and market makers' failing to discover company's value and increase liquidity.Broken of issuing price caused by disorder private placement programs and lack of restricted stock trade period hurts the market's confidence.What's more,imperfection of supervision institution and information disclosure also lead to information asymmetry between the company and investor.The article used multiple linear regression to make qualitative and empirical analyze about company's individual factors that influence a company's liquidity.Size of the company and its asset influences its liquidity in the secondary market as a bigger company has stronger economic strength,risk tolerance and more operating experience,which raises its popularity.A company's growing capacity such as the sales growth rate indicates its ability to follow the market's trend.A company with a promising future has a bigger growing space,which gives investors' a positive performance expectation of this company.As market makers are supposed to work as a value finder and liquidity raiser,a company with more market makers will have better liquidity.The quantity of market maker also reflects market makers' approval of this company.High share price reduces volume of stock exchange which means that these companies have lower liquidity.The last part of this article made some suggestions about how to raise liquidity of New Three Board.Entry barrier to investors should be lower to attract varieties of qualified investor to join the market under the condition that these investors have enough professional knowledge and risk tolerance.Companies should reduce stock concentration to raise the transparency of company's information and ensure a more scientific management.Different standards about investor's entry barrier,information disclosure and trading institution should be made to stimulate vitality of the market.The quantity and variety of market maker should be increased to realize market makers' function in value discovery and liquidity raising.To ensure listed companies' quality,delisting institution should be improved based on different kinds of factors such as the companies' performance and liquidity.Security companies should exercise their responsibilities in continuous supervision,follow these companies'operation and qualification,identify problems in time and urge companies to make rectification.When it comes to supervision,regulatory bodies' responsibility should be explicit and a combination between top institution design from China Securities Regulatory Commission(CSRC)and self-supervision from stock transfer system to ensure information disclosure and reduce information asymmetry between investors and company.Most of existing documents analyzed factors influencing liquidity from the perspective of the whole market such as the access institution,delisting institution and supervision institution,ignoring companies' individual factors.While in a few documents which analyzed companies' individual factors,there lacks analysis on the macrocosmic institution.The innovative part of this article is that it analyzes factors of New Three Board's low liquidity from both the perspective of the whole market and the company itself,and make suggestions about liquidity raising in the end.Besides,existing documents which analyzed companies' individual factors all focused on the main board of the stock market,which fail to make sure that the findings can perfectly go for the New Three Board.In this essay,some special features of New Three Board are taken into consideration such as the amount of market maker to make a conclusion applicable to New Three Board Market.With development of the institution of New Three Board,and the realization of function of market maker and market layering,liquidity of New Three Board may get better in the future.