TY - JOUR
T1 - Liquidity and capital structure
T2 - The case of Thailand
AU - Udomsirikul, Prasit
AU - Jumreornvong, Seksak
AU - Jiraporn, Pornsit
PY - 2011/4/1
Y1 - 2011/4/1
N2 - We explore the impact of liquidity on capital structure decisions. Firms that enjoy more liquid equity experience a lower cost of equity and may be more motivated to adopt more equity and less debt in their capital structure. Consistent with this notion, the empirical evidence demonstrates an inverse relation between liquidity and leverage. Our results are especially interesting because we examine firms in Thailand, where capital markets are less sophisticated than the U.S., bank loans more prevalent, and corporate ownership much more concentrated. In spite of these differences, we document that Thai firms with more liquid equity are significantly less leveraged.
AB - We explore the impact of liquidity on capital structure decisions. Firms that enjoy more liquid equity experience a lower cost of equity and may be more motivated to adopt more equity and less debt in their capital structure. Consistent with this notion, the empirical evidence demonstrates an inverse relation between liquidity and leverage. Our results are especially interesting because we examine firms in Thailand, where capital markets are less sophisticated than the U.S., bank loans more prevalent, and corporate ownership much more concentrated. In spite of these differences, we document that Thai firms with more liquid equity are significantly less leveraged.
UR - http://www.scopus.com/inward/record.url?scp=79952314662&partnerID=8YFLogxK
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U2 - 10.1016/j.mulfin.2010.12.008
DO - 10.1016/j.mulfin.2010.12.008
M3 - Article
AN - SCOPUS:79952314662
SN - 1042-444X
VL - 21
SP - 106
EP - 117
JO - Journal of Multinational Financial Management
JF - Journal of Multinational Financial Management
IS - 2
ER -