The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity

Objective: Since investors are usually risk averse, liquidity risk can affect the returns on their investments. Thus, liquidity is significant for investors. Given the management entrenchment hypothesis and the investment opportunities hypothesis, it is ambiguous to determine the type of effect of s...

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Autores principales:	Ardeshir Baharvand, Mohsen Dastgir, Afsane Soroushyar
Formato:	article
Lenguaje:	FA
Publicado:	University of Tehran 2021
Materias:	trading continuity financial constraint stock liquidity excess cash holding Accounting. Bookkeeping HF5601-5689 Finance HG1-9999
Acceso en línea:	https://doaj.org/article/f29b89194f0f46dfa8dd21c44392fcc5
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spelling	oai:doaj.org-article:f29b89194f0f46dfa8dd21c44392fcc52021-11-14T05:27:56ZThe Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity2645-80202645-803910.22059/acctgrev.2021.309218.1008425https://doaj.org/article/f29b89194f0f46dfa8dd21c44392fcc52021-05-01T00:00:00Zhttps://acctgrev.ut.ac.ir/article_81736_6d4fdb8d3bc1ec3a831235ecf4784e0f.pdfhttps://doaj.org/toc/2645-8020https://doaj.org/toc/2645-8039Objective: Since investors are usually risk averse, liquidity risk can affect the returns on their investments. Thus, liquidity is significant for investors. Given the management entrenchment hypothesis and the investment opportunities hypothesis, it is ambiguous to determine the type of effect of surplus cash on trading continuity and stock liquidity risk. Consequently, to overcome this ambiguity, it is necessary to empirically test these relationships. In this regard, the purpose of the present study is to investigate the effect of financial constraint on the relationship between cash surplus and liquidity risk and the continuation of stock trading of listed companies in the Tehran Stock Exchange during the period 2011- 2020. Methods: The statistical population of this research is the companies listed on the Tehran Stock Exchangethat for this purpose, 147 companies were selected through systematic elimination method and multivariate regression and Panel data method were used to test the hypotheses. Results: The results and findings of the study confirm the negative effect of surplus cash on liquidity risk and trading continuity. Other findings of the study Showed that financial constraints decline the relationship between excess cash and stock liquidity and transaction continuity. Conclusion: The results of the study indicate that the excess cash leads to an increase in agency and decrease in liquidity and continuity of transactions. This result is weaker in companies with financial constraints, because these companies can attract more investors and boost their stock trading through surplus cash. In other words, the existence of financial constraints leads to the dominance of the investment opportunity hypothesis over the management fortification hypothesis.Ardeshir BaharvandMohsen DastgirAfsane Soroushyar University of Tehranarticletrading continuityfinancial constraintstock liquidityexcess cash holdingAccounting. BookkeepingHF5601-5689FinanceHG1-9999FAبررسی‌های حسابداری و حسابرسی, Vol 28, Iss 1, Pp 31-53 (2021)
institution	DOAJ
collection	DOAJ
language	FA
topic	trading continuity financial constraint stock liquidity excess cash holding Accounting. Bookkeeping HF5601-5689 Finance HG1-9999
spellingShingle	trading continuity financial constraint stock liquidity excess cash holding Accounting. Bookkeeping HF5601-5689 Finance HG1-9999 Ardeshir Baharvand Mohsen Dastgir Afsane Soroushyar The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity
description	Objective: Since investors are usually risk averse, liquidity risk can affect the returns on their investments. Thus, liquidity is significant for investors. Given the management entrenchment hypothesis and the investment opportunities hypothesis, it is ambiguous to determine the type of effect of surplus cash on trading continuity and stock liquidity risk. Consequently, to overcome this ambiguity, it is necessary to empirically test these relationships. In this regard, the purpose of the present study is to investigate the effect of financial constraint on the relationship between cash surplus and liquidity risk and the continuation of stock trading of listed companies in the Tehran Stock Exchange during the period 2011- 2020. Methods: The statistical population of this research is the companies listed on the Tehran Stock Exchangethat for this purpose, 147 companies were selected through systematic elimination method and multivariate regression and Panel data method were used to test the hypotheses. Results: The results and findings of the study confirm the negative effect of surplus cash on liquidity risk and trading continuity. Other findings of the study Showed that financial constraints decline the relationship between excess cash and stock liquidity and transaction continuity. Conclusion: The results of the study indicate that the excess cash leads to an increase in agency and decrease in liquidity and continuity of transactions. This result is weaker in companies with financial constraints, because these companies can attract more investors and boost their stock trading through surplus cash. In other words, the existence of financial constraints leads to the dominance of the investment opportunity hypothesis over the management fortification hypothesis.
format	article
author	Ardeshir Baharvand Mohsen Dastgir Afsane Soroushyar
author_facet	Ardeshir Baharvand Mohsen Dastgir Afsane Soroushyar
author_sort	Ardeshir Baharvand
title	The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity
title_short	The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity
title_full	The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity
title_fullStr	The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity
title_full_unstemmed	The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity
title_sort	impact of financial constraints on the relationship between excess cash with trading continuity and stock liquidity
publisher	University of Tehran
publishDate	2021
url	https://doaj.org/article/f29b89194f0f46dfa8dd21c44392fcc5
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The Impact of Financial Constraints on the Relationship between Excess Cash with Trading Continuity and Stock Liquidity

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