The Impact of Investor Protection on Market Liquidity

• Main Author: 黃柏菖
• Other Authors: 鍾惠民
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/88918369038253982217

碩士 === 國立交通大學 === 財務金融研究所 === 100 === The ‘Subprime Crisis’ beginning in 2008 struck global economies widely by different degrees and caused a major panic throughout financial markets. Stock markets around the world dropped dramatically, freezing up market liquidity. As the crisis spread-out rapidly, it endangered not only a single market or country but caused a worldwide breakdown. This study attempts to explore the differences of market liquidity during the financial crisis by investigating its relation with investor protection laws in various countries. This study uses ADRs to analyze the effect of investor protection laws of different countries on the liquidity of ADR during the financial crisis between 2006 and 2009. The empirical result demonstrates that the liquidity of ADRs from countries with better investor protection laws is higher during subprime crisis; conversely, the liquidity of ADRs from countries with vague investor protection laws is lower. In addition, our result also showes that the wealth effect exists within markets: when market decrease results from the reduction of investors’ wealth, it lowers their ability and will to trade in the market which thus lessens the market liquidity.