The effect of stock liquidity on the supply and demand of commercial credit

The existing literature has emphasized the role of the debt market on the capacity of companies to generate commercial credits, and few studies have paid attention to the role of the stock market in this field. This research has investigated the relationship between the liquidity of stocks and the supply and demand of commercial credit of companies in the Tehran Stock Exchange.This research is quantitative in terms of strategy, descriptive in terms of objective orientation, and experimental in terms of approach. The companies accepted in the Tehran Stock Exchange are the statistical population of this research. This study was conducted based on a sample of Tehran Stock Exchange companies from 2013 to 2014. The data of 131 companies has been used as an unbalanced panel, and ordinary square estimator with fixed effects of year and industry has been used to test the hypotheses. Stock liquidity plays an important role in reducing information asymmetry and forming conservative leverage policies, and significantly affects the capacity of companies to generate more commercial credit sources and less dependence on commercial credit demand. Policymakers should focus on market liquidity because it increases the capacity of companies to provide capital through commercial credit capacity. The dependence between the liquidity of stocks and the terms of commercial credit flows capital from the stock market to economic sectors that are limited to participating in the stock exchange. The mentioned dependency is significant for developing economies where financial opportunities are not equal due to weak governance structures.