We just recently released the Note "Liquidity in Corporate Markets", which reviews 20 years of empirical research on the determinants and impact of liquidity in the corporate markets. A key conclusion from this review is that liquidity has tangible, significant benefits for corporates, as it reduces the overall cost of financing. At a country level, liquidity has been linked to economic growth. As these benefits are documented, the main question is then, how to promote liquidity. This review found that there no “bullet-proof” aggregate tools to address a low level of liquidity in a market. At the end of the day, liquidity will be a result of the presence of both a wide range of investors and a broad set of companies with “solid fundamentals,” which in turn are affected by the structure and functioning of the capital markets, the macroeconomic and institutional environments, and the level of development of the financial sector, since they all hinge on the risk-return appetite of investors on the one hand and the appetite and need for companies to raise funding in the capital markets on the other. #worldbank #capitalmarkets For more information see: https://lnkd.in/ePpsi4wb
Andrea Corcoran
9mo
Yes the liquidity conundrum for corporates as for many a buy and hold investment
Yasmin Fernandes Reis;
Senior Financial Sector Specialist at The World Bank
9moReally excited about this study. But, at the end of the day, the chicken and egg problem remains. Broad range of investors and corporates with good fundamentals are required for liquidity, but investors and corporates will not come if there is no liquidity. These are real issues for the stalemate in African capital markets development. How do we move forward?