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The Impact of Social Norms on Stock Liquidity

Author

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  • Dimcea Andrei

    (Babeş-Bolyai University)

Abstract

There is a growing body of research that shows the impact of culture on individual’s financial decisions. We aim to investigate how the strength of social norms and the tolerance for deviant behavior influence stock liquidity. Using a panel of 26 developed and 19 emerging countries we show that there is an inverted U-shaped relationship between the measure of cultural tightness-looseness, developed by Gelfand et al. (2011) and stock liquidity. Additionally, our results suggest that financial literacy has a moderating effect on the relationship between social norms and liquidity.

Suggested Citation

  • Dimcea Andrei, 2023. "The Impact of Social Norms on Stock Liquidity," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 68(1), pages 78-99, April.
    • Handle: RePEc:vrs:subboe:v:68:y:2023:i:1:p:78-99:n:5
    DOI: 10.2478/subboec-2023-0005
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    References listed on IDEAS

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    More about this item

    Keywords

    social norms; liquidity; trust; information asymmetry; financial literacy;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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