Does stock liquidity affect bankruptcy risk? DID analysis from Vietnam

We provide an out-of-sample test on Brogaard et al. (2017)’s difference-in-differences (DID) finding that stock liquidity affects US firm Expected Default Frequency (EDF), in the context of an emerging market. With daily transaction data, we reaffirm the role of stock liquidity on reducing firms' default risk in the US and its extended applicability to Vietnam. Our results highlight another benefit from promoting stock market liquidity as it could allow for sustainable development of an emerging equity market.