{"title":"Economic freedom and market resilience: Safeguarding liquidity in times of crisis","authors":"Hyun Joung Jin , Jang-Chul Kim , Qing Su","doi":"10.1016/j.mulfin.2025.100918","DOIUrl":null,"url":null,"abstract":"<div><div>This study examines the link between the liquidity of non-U.S. stocks listed on the NYSE and the economic freedom of their home countries, with a particular focus on the COVID-19 pandemic. The key hypothesis suggests that greater economic freedom enhances stock liquidity by reducing information asymmetry and transaction costs. The findings confirm that stocks from countries with higher economic freedom exhibit narrower bid-ask spreads, lower price impacts, and reduced information-based trading, indicating improved market efficiency. Additionally, the study finds that economic freedom played a crucial role in maintaining liquidity and market stability during the pandemic. Countries with stronger financial, investment, and trade freedom experienced smaller declines in liquidity, suggesting that regulatory flexibility and transparent financial systems helped mitigate the effects of external shocks. These results highlight the importance of economic freedom in fostering resilient financial markets and reducing market disruptions during crises. The study provides practical implications for policymakers, investors, and financial institutions by emphasizing the need to promote economic freedom through transparent regulations, investor protections, and efficient market structures. Ultimately, the research supports the idea that higher economic freedom not only enhances financial market efficiency in normal conditions but also acts as a stabilizing force in times of economic uncertainty and global crises.</div></div>","PeriodicalId":47268,"journal":{"name":"Journal of Multinational Financial Management","volume":"79 ","pages":"Article 100918"},"PeriodicalIF":2.9000,"publicationDate":"2025-06-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Multinational Financial Management","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042444X25000222","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This study examines the link between the liquidity of non-U.S. stocks listed on the NYSE and the economic freedom of their home countries, with a particular focus on the COVID-19 pandemic. The key hypothesis suggests that greater economic freedom enhances stock liquidity by reducing information asymmetry and transaction costs. The findings confirm that stocks from countries with higher economic freedom exhibit narrower bid-ask spreads, lower price impacts, and reduced information-based trading, indicating improved market efficiency. Additionally, the study finds that economic freedom played a crucial role in maintaining liquidity and market stability during the pandemic. Countries with stronger financial, investment, and trade freedom experienced smaller declines in liquidity, suggesting that regulatory flexibility and transparent financial systems helped mitigate the effects of external shocks. These results highlight the importance of economic freedom in fostering resilient financial markets and reducing market disruptions during crises. The study provides practical implications for policymakers, investors, and financial institutions by emphasizing the need to promote economic freedom through transparent regulations, investor protections, and efficient market structures. Ultimately, the research supports the idea that higher economic freedom not only enhances financial market efficiency in normal conditions but also acts as a stabilizing force in times of economic uncertainty and global crises.
期刊介绍:
International trade, financing and investments have grown at an extremely rapid pace in recent years, and the operations of corporations have become increasingly multinationalized. Corporate executives buying and selling goods and services, and making financing and investment decisions across national boundaries, have developed policies and procedures for managing cash flows denominated in foreign currencies. These policies and procedures, and the related managerial actions of executives, change as new relevant information becomes available. The purpose of the Journal of Multinational Financial Management is to publish rigorous, original articles dealing with the management of the multinational enterprise. Theoretical, conceptual, and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • Foreign exchange risk management • International capital budgeting • Forecasting exchange rates • Foreign direct investment • Hedging strategies • Cost of capital • Managing transaction exposure • Political risk assessment • International working capital management • International financial planning • International tax management • International diversification • Transfer pricing strategies • International liability management • International mergers.