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Stock liquidity and SMEs’ likelihood of bankruptcy: evidence from the US market

El Kalak, Izidin; Azevedo, Alcino; Hudson, Robert; Abd Karim, Mohamad


Izidin El Kalak

Alcino Azevedo

Mohamad Abd Karim


We study the association between the stock liquidity of SMEs in the US and their likelihood of bankruptcy, using a dataset that comprises information on 5075 firms over the time period from 1984 to 2013 using the hazard model of Campbell et al. (2008). We find that less liquid stocks are associated with higher probability of bankruptcy, although there is substantial heterogeneity across industries regarding the predictive power of the liquidity measure on the likelihood of bankruptcy. Furthermore, the exchange where the SMEs are listed also affects the likelihood of bankruptcy. Classification performance tests conclude that adding a liquidity measure variable to the Campbell et al. (2008) model improves its predictive power.


El Kalak, I., Azevedo, A., Hudson, R., & Abd Karim, M. (2017). Stock liquidity and SMEs’ likelihood of bankruptcy: evidence from the US market. Research in international business and finance, 42, 1383-1393.

Journal Article Type Article
Acceptance Date Jul 3, 2017
Online Publication Date Jul 8, 2017
Publication Date 2017-12
Deposit Date Jul 3, 2017
Publicly Available Date Jan 9, 2019
Journal Research in international business and finance
Print ISSN 0275-5319
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 42
Pages 1383-1393
Keywords Market liquidity, Liquidity measures, Bankruptcy, Hazard model
Public URL
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Additional Information This is the accepted manuscript of an article published in Research in international business and finance, 2017. The version of record is available at the DOI link in this record.


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©2019, Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license

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