Marking-to-Market, Commonality in Liquidity, and Government Guarantee Effect: Evidence From China

• Autores: Hawfeng Shyu
• Localización: Journal of Accounting Auditing and Finance, ISSN-e 2160-4061, ISSN 0148-558X, Vol. 32, Nº 1, 2017, págs. 73-91
• Idioma: inglés
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• Resumen

  • Based on market prices and other market inputs to value assets and liabilities, adopting fair-value measurement creates many unpredictable economic consequences, such as amplifying the vicious cycle of falling prices during a worldwide financial crisis. This article investigates whether marking-to-market disclosure affects the commonality in liquidity. Commonality in liquidity is defined as the sensitivity of stock liquidity to the variation in market liquidity. My study indicates that marking-to-market disclosure is associated with higher commonality in liquidity. In addition, I find that higher commonality in liquidity is associated with lower stock liquidity. I also find that a positive association between commonality in liquidity and stock illiquidity is mitigated by the effect of a government guarantee.