Empirical research on the relation between stock liquidity and firm performance

In this paper, the relation between stock liquidity and firm performance is investigated by using multivariate linear regression. With the sample data of the 1184 companies listed in Shanghai or Shenzhen Stock Exchange during 2006, 2007, 2008 and 2009. The empirical results show that firms with less liquid stocks have better performance as measured by the firm Tobin´s Q ratio. The result is robust to the use of alternative measure of liquidity. The regression results show that firm´s age, the book value, idiosyncratic risk, and whether be brought to the CSI300 index affect firm performance.