Firm location, investor recognition, and the liquidity of Chinese publicly listed SMEs

Lim, Kian Ping and Wei Liu and Chia, Yee Ee (2022) Firm location, investor recognition, and the liquidity of Chinese publicly listed SMEs. Borsa Istanbul Review, 23. pp. 334-349. ISSN 2214-8450

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Abstract

We assemble data of non-financial stocks on the Shenzhen small and medium-sized enterprise (SME) board over the 2005–2019 sample period to explore the liquidity drivers of listed SMEs. With the complete dominance of retail investors, two competing hypotheses are derived from familiarity. The empirical results reveal the insignificant role of firm location, whereas investor recognition exerts the largest effect on the liquidity of Chinese listed SMEs. This finding implies that having a large pool of potential investors with local bias does not give SMEs headquartered in megacities the home advantage in their quest for higher liquidity. Instead, liquidity improves because considerable shareholders hold stocks that they are familiar with or have knowledge about. The nonlinear relationship, however, highlights the costs of an expanded shareholder base because diffuse ownership exacerbates agency conflicts between the controlling shareholders and small individual investors.

Item Type:	Article
Keyword:	SME exchanges, Familiarity, Stock liquidity
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28-9999 Industries. Land use. Labor > HD2350.8-2356 Large industry. Factory system. Big business H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation > HG4900-5993 By region or country
Department:	FACULTY > Labuan Faculty of International Finance
Depositing User:	SITI AZIZAH BINTI IDRIS -
Date Deposited:	03 Sep 2025 10:52
Last Modified:	03 Sep 2025 10:52
URI:	https://eprints.ums.edu.my/id/eprint/45139

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