The Relationship between Stock Liquidity (from Corporate Governance and Informational Efficiency Points of View) and Default Risk in Iran's Petrochemical Industry and Oil Products Companies

Document Type: Original Article

Authors

1 Department of Accounting, Tehran Faculty of Petroleum, Petroleum University of Technology, Tehran, Iran

2 Department of Energy Economics and Management, Tehran Faculty of Petroleum, Petroleum University of Technology, Tehran, Iran

3 Petroleum University of Technology

Abstract

The main purpose of this research is to explain why and how the stock liquidity affects the default risk of petrochemical and petroleum products companies listed in Tehran Stock Exchange. The study used experimental data and parametric tests in order to estimate the relationship between stock liquidity and default risk through information efficiency and corporate governance roles of stock liquidity. The present research is applied in terms of purpose and is a descriptive-correlative study. All data required regarding the stock liquidity, price, trading volume and days, stockholder ownerships, etc., were extracted from Rahavard Novin database software. To investigate the relationship between variables, the multivariate regression analysis model using OLS method was applied in Eviews platform. The empirical findings showed that there is a significantly negative relationship between stock liquidity and default risk of petrochemical and petroleum product companies listed in TSE and also stock liquidity can affect the default risk through reducing the information asymmetry in the stock pricing process and strengthen the corporate governance. These results could provide visible signals based on the realities of the market in order to improve models to assess and predict the risk of default and lead managers and decision makers of suppliers, customers, partners and stakeholders, to conclude more flexible contracts with petrochemical and petroleum products companies and ultimately better mitigate business risks.

Keywords



Articles in Press, Accepted Manuscript
Available Online from 02 March 2020
  • Receive Date: 21 August 2019
  • Revise Date: 25 February 2020
  • Accept Date: 02 March 2020