Liquidity, Investors and International Capital Markets

D Vagias

Research output: Types of ThesisDoctoral ThesisInternal


This dissertation consists of four empirical studies that seek to furnish a better understanding over liquidity¿s broader implications in the decision-making process of investors, managers and regulators in international capital markets. Chapter 2 investigates the time-series as well as cross-sectional properties of the interaction between foreign equity flows and local liquidity conditions. My findings suggest that foreign investors are less likely to aggravate adverse selection problems in financial markets that are more developed and demonstrate higher levels of transparency. Chapter 3 shows that liquidity conditions play an important role in the decision to perform an equity offering. Moreover, my findings suggest that in imperfectly liquid markets, companies take into consideration the slope of the demand curve for their stock when deciding upon the type of an equity offering. Chapter 4 shows that banks subject to more intense monitoring by equity markets operate closer to the efficient frontier and are thus able to generate more value from their investments. It also shows that the liquidity effects is significantly more pronounced in the case of banks that are more susceptible to principal-agent type of conflicts. Chapter 5 investigates the extent of clustering of adverse liquidity shocks within and across particular geographic regions. I document that liquidity contagion is more pronounced in ¿high¿ rather than ¿low quality¿ stocks. Finally, I show that cross-border portfolio investment can aggravate the clustering of negative liquidity shocks across markets that benefit disproportionately from such flows.
Original languageEnglish
Awarding Institution
  • Erasmus University Rotterdam
  • van Dijk, Mathijs, Supervisor
  • Driessen, Doctoral committee member
  • Verbeek, Marno, Doctoral committee member
Award date18 Oct 2013
Place of PublicationRotterdam
Print ISBNs9789058923431
Publication statusPublished - 18 Oct 2013

Research programs

  • RSM F&A


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