alexa Banking Liquidity and Stock Market Prices in ASEAN-3 Ec
ISSN: 2167-0234

Journal of Business & Financial Affairs
Open Access

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Research Article

Banking Liquidity and Stock Market Prices in ASEAN-3 Economies

Chung TF1* and Ariff M2

1Taylor’s University, 47500 Subang Jaya, Selangor, Malaysia

2University Putra Malaysia, 43400, Serdang, Selangor, Malaysia

*Corresponding Author:
Tin-fah Chung
senior lecturer, Taylor’s University
47500 Subang Jaya, Selangor, Malaysia
Tel: 60122833902
E-mail: [email protected]

Received date May 17, 2016; Accepted date May 26, 2016; Published date June 06, 2016

Citation: Chung TF, Ariff M (2016) Banking Liquidity and Stock Market Prices in ASEAN-3 Economies. J Bus Fin Aff 5:190. doi:10.4172/2167-0234.1000190

Copyright: © 2016 Chung TF, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

 

Abstract

The Global Financial Crisis has its origins in the surge in banking liquidity, which contributes to the volatility and instability of financial markets by affecting prices of financial instruments. This paper investigates the impact of banking liquidity, money supply and stock prices in ASEAN-3 economies. Although banking liquidity is widely attributed as one of the causes of financial instability, it is not fully verified or investigated despite earlier research attempts. The transmission channel of banking liquidity to banking credit is through net present value projects of firms. With higher net present value, this will support earnings and consequently share prices of firms will respond positively. This is the thesis statement of our paper and according to a major study, 52% of share returns emanate from macro-economic variables. To control for cross-section dependence and heterogeneity, this study use a panel data of 3 similar countries with 3 equations to study the relationship between money supply, liquidity and share prices over the period 2001:4 to 2012:2. Our findings show that banking liquidity is positively related to money supply with a positive impact on share prices.

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