Firm visibility, liquidity, and valuation for thinly traded assets

Abstract

We employ a regression discontinuity design to study how a market division experiment affects stock liquidity and firm valuation in an illiquid market. We document that an increase in firm visibility can substantially improve a firm's liquidity (measured by trading immediacy) and increase valuation by 28.4% for thinly traded assets. We also find some evidence that an improved information environment may contribute to enhanced liquidity and valuation.