Stock and corporate bond liquidity: When having the same issuer induces commonality

• There is a positive and significant contemporaneous relationship between the liquidity of bonds and stocks with the same issuer. • The result is robust to different bond sample selection criteria, empirical methodologies, and proxies for liquidity. • The bond-stock liquidity relationship is stronger in the non-institutional segment of the corporate bond market. • The bond-stock liquidity relationship increases with the issuer’s financial risk. This paper evaluates the cross-asset co-movements of the liquidity of stocks and corporate bonds issued by the same firm, revealing a positive and significant contemporaneous relationship between the liquidity of the two assets. This finding is robust to different bond sample selection criteria, alternative methodologies, and various proxies for liquidity. Moreover, the intensity of said relationship depends on both bond and firm risk characteristics. Specifically, we find that the liquidity of bonds in the non-institutional segment of the market and the liquidity of those issued by firms with high financial risk are more strongly connected to stock liquidity shocks.