Liquidity and solvency of a company and the rate of return: An analysis of the Warsaw Stock Exchange

Zalewska, Jus yna; Neh ebecka, Na alia A icle Liquidi y and sol ency o a company and he a e o e u n: An analysis o he Wa saw S ock Exchange Cen al Eu opean Economic Jou nal (CEEJ) P o ided in Coope a ion wi h: Facul y o Economic Sciences, Uni e si y o Wa saw Sugges ed Ci a ion: Zalewska, Jus yna; Neh ebecka, Na alia (2019) : Liquidi y and sol ency o a company and he a e o e u n: An analysis o he Wa saw S ock Exchange, Cen al Eu opean Economic Jou nal (CEEJ), ISSN 2543-6821, Sciendo, Wa saw, Vol. 6, Iss. 53, pp. 199-220, h ps://doi.o g/10.2478/ceej-2019-0013 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/324506 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. 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Cen al Eu opean Economic Jou nal, 6(53), 199-220. DOI: 10.2478/ceej-2019-0013 To link o his a icle: h ps://doi.o g/10.2478/ceej-2019-0013 Liquidi y and sol ency o a company and he a e o e u n – an analysis o he Wa saw S ock Exchange Jus yna Zalewska, Na alia Neh ebecka Open Access. © 2019 J. Zalewska, N. Neh ebecka, published by Sciendo. This wo k is licensed unde he C ea i e Commons A ibu ion-NonComme cial-NoDe i a i es 3.0 License. Jus yna Zalewska Facul y o Economic Sciences, Uni e si y o Wa saw , Wa saw, Poland, Na alia Neh ebecka Facul y o Economic Sciences, Uni e si y o Wa saw , Wa saw, Poland, co esponding au ho : nneh [email protected] Liquidi y and sol ency o a company and he a e o e u n – an analysis o he Wa saw S ock Exchange Abs ac The pu pose o he a icle is o analyse he impac o a ious inancial a ios used o e alua e a company’s liquidi y and sol ency on he a es o e u n on he sha es o companies lis ed on he Wa saw S ock Exchange. In he con ex o de eloping coun ies, he ela ionship be ween liquidi y and sol ency on he one hand and he e u n on equi y on he o he is s ill no clea . Poland is he mos economically de eloped coun y in Cen al and Eas e n Eu ope. A ho ough analysis is necessa y o ake app op ia e ac ion and in oduce adequa e egula ions in he coun y, as well as o c ea e he ounda ion o esea ching o he economies in his egion. In addi ion, his a icle includes new es ima o s ha ha e no ye been aken in o accoun bu ha may a ec he a es o e u n, which will con ibu e o he li e a u e on he subjec and o he de elopmen o knowledge on he ola ili y o e u ns on sha es. In he s udy, we ha e calcula- ed he ime- a ying be a coe icien s o he capi al asse p icing model (CAPM) model and analysed po olios based on h ee liquidi y a ios and ou sol ency a ios, which we e compu ed using he CAPM, Fama–F ench and Ca ha models. The empi ical s udy desc ibed in he a icle ocuses on companies lis ed on he Wa saw S ock Exchange in he pe iod om 1 Janua y 1999 o 30 June 2013. Reg essions we e es ima ed by he leas -squa es me hod and by quan ile eg ession. Based on he esul s, i was ound ha lis ed companies a isk o bank up cy a e able o mee hei sho - e m liabili ies. Liquidi y and sol ency measu ed by inancial a ios signi ican ly a ec he sensi i i y o he a e o e u n on sha es o he isk ac o s exp essed in he CAPM, Fama––F ench and Ca ha models. Keywo ds liquidi y | sol ency | asse p icing models | CAPM | po olio analysis JEL Codes G12, G32, G33, G35 1 In oduc ion The ola ili y o a es o e u n and i s de e minan s a e e y o en analysed in he a ailable li e a u e. In he cou se o esea ch, he capi al asse p icing model (CAPM) model, which es s he sensi i i y o a gi en asse o ma ke isk, was c ea ed. Then, i s ex ensions appea ed, he mos popula o which a e he Fama– F ench and Ca ha models. They usually p o ide a sa is ac o y explana ion o he beha iou o a es o e u ns, bu he ob ained esul s show ha he e is an addi ional ac o ha should be aken in o accoun . One o he ideas o augmen ing business asse p icing models is inco po a ing he company’s liquidi y o sol ency in o analysis. Based on he li e a u e e iew, he e a e s udies on he ola ili y o e u ns on sha es ha ake in o conside a ion he liquidi y o sol ency o a i m. Howe e , hese analyses o en cen e on s ock exchanges in he Uni ed S a es and a e usually e y ad anced due o he deg ee o de elopmen o he US economy. Cu en s udies also e i y new es ima o s ha may a ec he a es o e u n and ha ha e no been used in p e ious esea ch. Conclusions om esea ch on he US s ock ma ke a e usually ans e ed o less-economically de eloped coun ies, which CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 201 c ea es ano he g oup o analyses. Qui e o en, hey ocus on g adually ex ending he esea ch ca ied ou so a by e i ying he e ec s iden i ied in he Uni ed S a es. The e is also a ca ego y o esea ch s udies on eme ging ma ke s, which mos o en deal wi h pinpoin ing basic co ela ions. Wi h ega d o he analyses o he Wa saw S ock Exchange, he e is s ill oom o u he esea ch in his ield. Conclusions om he analysis o he esul s o asse alua ion models di e depending on he adop ed measu e o liquidi y o sol ency (Lischewski and Vo onko a, 2012). I is, he e o e, wo h pe o ming an analysis o he easibili y o hi he o-un es ed indica o s. The pu pose o he a icle is o analyse he in luence o a ious inancial a ios o he assessmen o a company’s liquidi y and sol ency on he a es o e u n on s ocks o he companies lis ed on he Wa saw S ock Exchange. We u ilised liquidi y a ios such as he cu en liquidi y a io, he quick a io and he wo king capi al a io. We also adop ed ou sol ency a ios: Al man Z-sco e, he deb a io, he le e age a io and he ixed asse co e age a io.1 In he case o de eloping coun ies, he ela ionship be ween liquidi y and sol ency on he one hand and he e u n on equi y on he o he is s ill unclea . Poland is he mos economically de eloped coun y in Cen al and Eas e n Eu ope. A ho ough analysis is equi ed o ake app op ia e ac ion and in oduce necessa y egula ions in he coun y, as well as o c ea e he basis o esea ching o he economies in his egion. The empi ical s udy p esen ed in he a icle ocuses on companies lis ed on he Wa saw S ock Exchange in he pe iod om 1 Janua y 1999 o 30 June 2013. I consis s o wo s ages. The i s s ep in ol es p esen ing he beha iou o mean and median alues o ime- a ying be a coe icien s o he CAPM model ac oss he quan iles o he sol ency and liquidi y a ios. The second s ep aims o illus a e he esul s ob ained om he CAPM, Fama–F ench and Ca ha asse p icing models acco ding o he po olios buil on he basis o liquidi y and sol ency a ios. The me hodology adop ed in he a icle is classical eg ession es ima ed by he leas -squa es me hod and quan ile eg ession. In he empi ical s udy, wo hypo heses we e assumed. The i s main hypo hesis was ha 1 Gab usiewicz (2014) discusses he deb a e and he asse co e age a io as es ima o s o a company’s sol ency and inancial independence, espec i ely. The le e age a io is applied as a measu e o sol ency in Medha ’s esea ch (2014). companies a isk o bank up cy a e able o mee hei sho - e m obliga ions. This ela ionship was p o ed by Medha (2014) o companies lis ed on Ame ican s ock exchanges. Poland is a a much lowe le el han he Uni ed S a es in e ms o economic de elopmen , bu as men ioned ea lie , i is a leade in he egion o Cen al and Eas e n Eu ope. The e o e, i seems in e es ing o check whe he he co ela ion obse ed on he US s ock exchanges is ue o he Wa saw S ock Exchange. The second hypo hesis was ha liquidi y and sol ency measu ed by inancial a ios signi ican ly a ec he sensi i i y o he a e o e u n on sha es o isk ac o s exp essed in he CAPM, Fama–F ench and Ca ha models. The in es iga ions o Li e al. (2014) on he Tokyo S ock Exchange, Vu e al. (2015) on he Aus alian ma ke , Co e e al. (2015) on he London S ock Exchange, Ba en and Vo (2014) on Vie nam, and Mino ić and Ži ko ić (2012) on Se bia, as well as he s udies o he Ame ican s ock exchanges, sugges ha he e is no eason o ejec he abo e hypo hesis. The e o e, he co ela ion seems o occu ega dless o he deg ee o he coun y’s economic de elopmen and o i s speci ic na u e. The suspicion ha he desc ibed ela ionship is also alid o Poland is, he e o e, indica ed and wo h examining. The a icle is di ided in o he ollowing sec ions. Sec ion 2 ou lines he heo e ical issues in he a ea o a es o e u n, o asse -p icing me hods, as well as he liquidi y and sol ency o a i m. The nex sec ion (Sec ion 3) p esen s esea ch o da e on he e ec o liquidi y and sol ency on a es o e u n on equi y o companies. The las sec ion (Sec ion 4) o e s an examina ion o he impac o liquidi y and sol ency on he a es o e u n on sha es o companies lis ed on he Wa saw S ock Exchange. I also con ains a desc ip ion o he da a and he u ilised me hodology. Finally, he main conclusions and a summa y o he a icle a e p esen ed. 2 Theo e ical ounda ions o esea ch on he a e o e u n on sha es The ou pu o economic heo y in he ield o liquidi y and sol ency o a i m, me hods o asse alua ion and explana ion o e u ns on sha es is copious and s ill g owing. In o de o loca e ou conside a ions wi hin CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 202 he delinea ed economic concep s, his sec ion lis s he mos impo an issues ela ed o he subjec o analysis. While p esen ing he a es o e u n on sha es, i is impossible no o e e o he isk in ol ed in hem. This isk can ha e wo dimensions (Dębski, 2014). One o hem is he isk a ising om he haza ds ha h ea en a speci ic company and a e cha ac e is ic only o i and, possibly, se e al o i s compe i o s. This aspec is called idiosync a ic isk, and i s elimina ion is possible h ough po olio di e si ica ion. The e is also a isk ha canno be emo ed by any measu e because i s ems om mac oeconomic ac o s a ec ing all companies ha ope a e wi hin a gi en economic sys em. I is de ined as sys emic isk, and e e y in es o is exposed o i . These issues unde lie he p icing o asse s, and hus, hei cla i ica ion is necessa y o de ine asse alua ion models. F om an in es o ’s pe spec i e, i is e y impo an o be awa e o he ac o s a ec ing he a es o e u n on a company’s s ocks. The pa ame e s ha a e o en men ioned in his con ex a e he company’s liquidi y and sol ency. I should be emembe ed ha examining a company’s si ua ion in his espec equi es a clea de ini ion o liquidi y and sol ency. The dis inc ion be ween inancial liquidi y, sol ency and ading liquidi y is c ucial he e.2 These e ms should no be used in e changeably because hey ha e di e en meanings. As he subjec o asse alua ion was gaining ac ion, a ious models explaining he beha iou o a es o e u n on sha es appea ed in economic heo y. The basic ool he e is he CAPM model, on he basis o which mo e ad anced e sions such as he Fama– F ench o Ca ha model we e la e buil . In addi ion, he CAPM model modi ied by inco po a ing a a io o liquidi y and a Fama–MacBe h es ima ion me hod3 s and ou . 2  In he con ex  o  e minology, Jachna and Sie pińska (2004) addi ionally dis inguish liquidi y o asse s, which is de inedby hepossibili yo quickexchangeo indi idual elemen s o he company’s asse s o cash. Liquidi y o asse s is an aspec ha a ec s he assessmen o a company’s inancial liquidi y. 3 The CAPM model ex ended by sol ency (LCAPM) and he Fama–MacBe h es ima ion me hod a e no used in ou empi ical s udy, bu hey appea in he li e a u e. LCAPM hasbeenusedin heanalysiso LischewskiandVo onko a (2012),Hea n(2014),Mino ićandŽi ko ić(2012),B ad ania and Pea (2013) and B ad ania and Pea (2014). The Fama– MacBe h es ima ion me hod can be ound, among o he s, in hewo ks o Medha (2014),Hu man andMoll (2012), Wang (2012) and Co e e al. (2015). Hence, i is impo an o p esen he heo y behind bo h concep s. 3 Impac o liquidi y on a es o e u n om equi y in he li e a u e The analysis o ac o s a ec ing he a e o e u n on company equi y has been e y o en pe o med in he a ailable li e a u e. The desi e o explo e his issue is mo i a ed by looking o a eas ha can con ibu e o imp o ing he e u n on equi y. The ela ionships be ween isk a ios, he company’s sol ency a ios and he company’s indi idual cha ac e is ics on he one hand and he a e o e u n on equi y on he o he a e mos o en sc u inised. Mos o he au ho s d aw on Fama and F ench’s heo y and on he CAPM model. The majo i y o s udies on his opic a emp o augmen he ange o explana o y ac o s by adding a new es ima o ela ed o ei he isk o , e.g., he condi ion o he company o he exis ing heo y. Mos o en, in he ini ial phase, he impac o he new indica o s is es ed on sample companies lis ed on Ame ican s ock exchanges. This has o do wi h he highly de eloped na u e o he US economy, he size o he US s ock exchanges and hei long his o y. Rega dless o he esul s o hese analyses, and ega dless o whe he o no hey iden i y a signi ican ela ionship, based on such esea ch, new ac o s a e inco po a ed in o s udies on coun ies cha ac e ised by lesse economic de elopmen han he Uni ed S a es. The e is also a g oup o s udies ha ocus on in es iga ing he basic ela ionships o a eas o ime pe iods no ye conside ed in he a ailable li e a u e. In o de o discuss he subjec o he a e o e u n on equi y in mo e de ail, his sec ion p o ides an o e iew o selec ed a icles, which a e di ided in o ou g oups. The i s o hese co e s publica ions abou companies lis ed on s ock exchanges loca ed in he Uni ed S a es. The second includes esea ch conduc ed on da a om he London, Singapo e, Aus alian and Japanese s ock exchanges. They a e less ad anced han he analyses in he i s g oup; howe e , hey also b oaden he se o ac o s s udied so a o imi a e he s udies concen a ing on he Uni ed S a es. The hi d g oup comp ises a icles abou Taiwan, Vie nam, Nige ia and Se bia, which analyse mo e elemen a y dependencies. Finally, selec ed s udies ca ied ou so a on companies lis ed on he Wa saw S ock Exchange a e addi ionally p esen ed. CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 203 3.1 Resea ch on he US s ock exchanges Companies lis ed on s ock exchanges loca ed in he Uni ed S a es comp ise one o he mos equen ly analysed opics. Despi e he weal h o a ailable li e a u e, esea che s a e cons an ly ying o expand he scope o esea ch wi h new a iables o indica o s. A popula and widesp ead end in esea ch on he a e o e u n on equi y o a i m is conside ing he i m’s liquidi y o sol ency a io. Ga lappi and Yan (2011) en e ed a company’s inancial liabili ies in o he equi y p icing model and checked how he likelihood o sha eholde s egaining capi al a ec s he ela ionship be ween e u ns on equi y and he p obabili y ha he i m will de aul , measu ed as he Expec ed De aul F equency. Lin e al. (2011) ocused on e i ying he s a is ical signi icance o he co ela ion be ween he a io o sys emic liquidi y isk and he a e o e u n on s ocks. The isk calcula ed in his analysis is de ined as he odds o a dec ease in he alue o s ocks a a ime when he agg ega e ma ke liquidi y alls, while he liquidi y a io is ei he he Amihud o he Pas o –S ambaugh a io. Palazzo (2012) p esen ed a s udy on he cons uc ion o a model explaining he e ec o co ela ions be ween cash lows and he sou ce o agg ega e isk on he op imal amoun o a company’s cash holdings. Acha ya e al. (2012) linked cash ese es o c edi isk and demons a ed ha he p ecau iona y p inciple has he highes p io i y e en o companies ha issue s ocks. Hu man and Moll (2012), when examining he a e o e u n on a i m’s equi y, ea ed isk di e en ly compa ed o he au ho s o he p e iously men ioned s udy. The au ho s sc u inised he impac o asymme ical isk a ios, such as alue a isk (VaR) and he home un a io, on equi y e u ns. Wang (2012), on he o he hand, looked a he e ec o co po a e liquidi y4 on he e u n on equi y. One o he objec i es o ha s udy was o de e mine whe he he sol ency a io i adop s yields di e en ou comes when explaining he le el o e u n on equi y han do he size ac o o he company and he a io o he company’s book alue o i s ma ke alue. B ad ania and Pea (2013) b oadened he cu en analyses by a la ge his o ical con ex by examining he ela ionships be ween sol ency and e u n on equi y o companies o he da a o he yea s 4 Co po a e liquidi y is de ined as he a io o he amoun o cash held by a company i in mon h o he o al asse s owned by he company i in mon h . A high alue o he a io means high liquidi y o he company, while a low alue indica es low sol ency. 1926–2008. The au ho s de ined he liquidi y measu e as a s ock cha ac e is ic and applied he E ec i e Tick4 (hence o h EFFT) EFFT es ima o based on daily ansac ion da a, as de eloped by Holden (2009). B ad ania and Pea (2014) de e mined whe he , in esea ch on he a e o e u n on company equi y, liquidi y should be ea ed as a s ock cha ac e is ic o pe haps as a measu e a ibu ed o he en i e ma ke . F iewald e al. (2014), on he o he hand, a emp ed o es ima e he isk p emium o Ame ican companies and o ie hose alues o he excess e u n on equi y. The au ho s obse ed a posi i e co ela ion be ween he isk p emium measu e and e u n on capi al. Medha (2014) demons a ed ha a company’s cash esou ces can balance low e u ns on en u e capi al. In con as o he a ailable li e a u e on he subjec , which mainly e ol es a ound he heo y o capi al s uc u e, Medha explo ed he issue o main aining a le el o cash su icien o minimise he isk o loss o he company’s liquidi y. Pa k (2015) spa ked a discussion on he impac o he alue o s ocks issued by a company on he p o i abili y o i s equi y. In o he US a icles, Amihud’s es ima o (2002) has been a e y equen ly applied measu e o liquidi y. Fo example, Bali and Zhou (2016) adop ed his measu e as a con ol a iable when es ing he obus ness o esul s acco ding o he model speci ica ion me hod. The main pu pose o he a o emen ioned esea ch was o check whe he ma ke isk and economic unce ain y ha e a signi ican and posi i e e ec on he a e o e u n on s ocks. The esea ch ou lined abo e was done on Ame ican s ock exchanges. A ecu ing conclusion in mos o he pape s is ha he common opinion abou he highe sol ency o companies wi h la ge cash esou ces is no ue. I has been con i med, howe e , ha liquidi y and sol ency a e impo an aspec s ha explain he beha iou o e u n on sha es. 3.2 Resea ch on he s ock exchanges in London, Singapo e, Japan and Aus alia The second g oup o a icles deals wi h he companies lis ed on he s ock exchanges in London, Singapo e, Japan and Aus alia. The eason o his g ouping is he simila his o y o he s ock exchange in each o hese coun ies and a simila s age o economic de elopmen in each o hem. A kind o e e ence poin o inspi a ion o analyses ca ied ou in CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 204 his g oup is usually esea ch based on Ame ican companies. So and Tang (2010) ha e s udied da a o he Singapo e S ock Exchange in o de o empi ically e i y he use ulness o he ma ke be a coe icien , i m size measu es, book- o-ma ke (B/M) equi y a io and ea nings- o-sha e a io in explaining he e u ns on equi y. Li e al. (2014) ha e analysed companies lis ed on he Tokyo S ock Exchange. Thei main pu pose has been o check whe he he a e and isk o insol ency a e echoed in he a es o e u n on equi y o Japanese companies. Vu e al. (2015) ha e also in es iga ed he ela ionship be ween sol ency and e u ns on company equi y, bu o he Aus alian ma ke . They ha e pos ula ed ha in es o s demand highe a es o e u n on sha es o which sol ency dec eases as ma ke liquidi y dec eases. Co e e al. (2015) ha e examined companies lis ed on he London S ock Exchange. The goal o hei s udy is o analyse how sha e-speci ic isk, called idiosync a ic isk, a ec s he a e o e u n on equi y o a i m. Wha dis inguishes his pape is ha i includes he a iable “ esponse o excess e u n on equi y” o sys ema ic be a isk depending on whe he he excess e u n on equi y is posi i e o nega i e. The s udies p esen ed abo e ha e been ca ied ou in geog aphic a eas wi h simila economic de elopmen . Mos o hem suppo he conclusion ha liquidi y and sol ency signi ican ly a ec he a es o e u n. The liquidi y-adjus ed CAPM (LCAPM) model is ound o be be e sui ed o he da a han he s anda d CAPM model. Mo eo e , in hese pape s, he mos popula app oach o asse p icing is he use o he CAPM and he Fama–F ench models. 3.3 Resea ch on he Nige ia, Se bia, Taiwan and Vie nam s ock exchanges Ano he g oup o pape s comp ises esea ch cons uc ed on he basis o da a om Nige ia, Se bia, Taiwan and Vie nam s ock exchanges. In each o hese ou coun ies, he du a ion o he s ock ma ke has been qui e simila and hei economy can be desc ibed as a de eloping ma ke . S udies cen ed on hese coun ies mos ly e i y he basic ela ionships ha wo k well in o he ma ke s. The scope o he analysis is qui e na ow, and he a icles a e a he aimed a c ea ing a base ha allows mo e ex ensi e esea ch in he u u e. Mino ić and Ži ko ić (2012) ha e es ed he easibili y o using he Fama–F ench and Ca ha models in illus a ing and o ecas ing he beha iou o a es o e u n on capi al o companies lis ed on he Se bian s ock ma ke .5 Conside ing he example o Taiwan, Chen and Lee (2013) ha e gauged whe he he isk o a company’s bank up cy has a signi ican impac on i s e u ns on equi y and how he co ela ion be ween hese a iables is exp essed in he Fama– F ench and Ca ha models.6 Mo eo e , Ba en and Vo (2014) ha e pe o med an analysis o he companies lis ed on he Vie nam S ock Exchange. The main goal o hei s udy is o examine he ela ionship be ween liquidi y and s ock e u ns in his ma ke du ing he global inancial c isis. The au ho s ha e iden i ied a posi i e co ela ion be ween sol ency and e u ns on capi al. The eason o his s a e o a ai s, in he esea che s’ opinion, is a smalle deg ee o in eg a ion o he eme ging ma ke wi h global ma ke s. As in he case o o he ma ke s, in he case o Taiwan also, he ela ionship be ween he be a coe icien and e u ns on capi al u ns ou o be nega i e and s a is ically signi ican . Hea n’s s udy (2014) on Nige ia has shown he impac o company size and insol ency o all companies lis ed on he local s ock exchange and ac oss indi idual sec o s. I canno be unequi ocally concluded om he esea ch on eme ging ma ke s, which has been p esen ed in his sec ion, whe he liquidi y and sol ency signi ican ly a ec he a es o e u n. The signi icance o hese ac o s depends on he ma ke unde analysis, as each o hem has i s own speci ic ci cums ances ha can a ec he esul s o he s udy. 3.4 Resea ch on he s ock exchange in Poland Poland is o en e e ed o as he mos ad anced eme ging ma ke among Cen al and Eas e n 5 Be o e hey conduc he analysis p ope , hey no e se e al ac s ha a e ue o  helocalma ke .Fi s o  all, i is no de eloped, i has low liquidi y and he e is alacko  anspa encyincompany epo s.Inaddi ion, hehis o yo  hes ockexchangei sel and hehis o ical scope o da abases a e small. These ea u es mean ha he ela ionships no ed o  hes ockma ke  in Se bia maydi e  om hoseobse edino he ma ke s. 6 A he beginning, i should be no ed ha he Taiwan s ockma ke issigni ican lydi e en  om hema ke s o de eloped coun ies, because i is e y ola ile and is cha ac e ised by high liquidi y. T ansac ion cos s a e also de e mined di e en ly. In addi ion, he majo g oup o playe s in Taiwan consis s o small indi idual in es o s, who can o en be desc ibed as unin o med. CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 205 Eu opean coun ies. The beginnings o he Wa saw S ock Exchange da e back o 1991, so he ime pe iod a ailable o analysis is ela i ely sho . Ne e heless, he e a e se e al s udies wo h men ioning in he con ex o analysing he ola ili y o e u ns on co po a e sha es. They cons i u e he las g oup o s udies discussed he e. Resea ch is p esen ed in he o de om he leas o he mos complex. The i s s udy is by Czapkiewicz and Wój owicz (2014), who ha e assessed he easibili y o he ou - ac o Ca ha model o da a om he Wa saw S ock Exchange. The ou comes o empi ical analysis e eal ha he cons uc ed po olios a e e ec i e o he ou - ac o Ca ha model. The nex s ep in he analysis is o pe o m c oss-sec ional eg ession o hese po olios. He e, only he Ca ha model is es ima ed. I u ns ou ha only he ma ke ac o and he momen um ac o a e s a is ically signi ican in his eg ession. Despi e he insigni icance o he company size and capi alisa ion pa ame e s, hei explana o y alue measu ed wi h he 2 R a io is 60% o he model analysing he size– alue po olios and 73% o he size–momen um po olios. As he au ho s ha e concluded, he momen um e ec domina es he company size e ec and i s capi alisa ion when explaining he ola ili y o a es o s ock e u ns o companies lis ed on he Wa saw S ock Exchange. Waszczuk (2013) has conduc ed a mo e ex ensi e analysis o he ola ili y o a es o e u n on sha es o Poland. No icing he sho age o cu en analyses on sha e p icing ends in he eme ging ma ke s, he au ho has illed his gap by deciding o examine s ock p icing in he pe iod om July 2002 o June 2011. His esea ch in es iga es whe he he ela ionships be ween he cha ac e is ics o s ocks o companies and a es o e u n iden i ied o de eloped ma ke s also hold ue o he Wa saw S ock Exchange. Fo po olios, a co ela ion be ween a company’s ma ke capi alisa ion and he momen um ac o (con inuous capi alisa ion o pas e u ns om -12 o -2) is no ed ega dless o he cons uc ion o he sha e po olio. On he o he hand, he a io o he company’s book alue o i s ma ke alue p o es o be an impo an de e minan in explaining he c oss-sec ional a iabili y o e u ns. In he nex s age, he au ho examines whe he he Fama and F ench h ee- ac o model is be e sui ed o he da a han he CAPM model. She has concluded ha he h ee- ac o model be e explains he a iabili y o a es o e u n o so ed po olios based on he company’s ma ke capi alisa ion, he B/M a io and he e e sal ac o . Waszczuk (2013) has con ended ha liquidi y is no signi ican ly ela ed o he alua ion o s ocks. To diagnose whe he his is caused by he lack o e ec o sol ency e u ns on he Wa saw S ock Exchange o maybe by he need o use a measu e o he han u no e o he Polish ma ke , i is wo h ci ing he a icle by Lischewski and Vo onko a (2012). The pu pose o hei s udy has been a comp ehensi e analysis o he ela ionship be ween he h ee ac o s o Fama–F ench and liquidi y and sol ency and he a e o e u n on sha es o companies lis ed on he Wa saw S ock Exchange in he pe iod om Janua y 1996 o Ma ch 2009. Fo he s anda d CAPM model, he s a is ical signi icance o ee exp ession has been shown o mos he po olios. Be a coe icien s p o e o be posi i e and s a is ically signi ican . In he case o he Fama–F ench model, all ac o s u n ou o be signi ican ly di e en om ze o and posi i e. Fu he mo e, he cons an e m shows s a is ical signi icance, which suppo s he au ho s’ supposi ion ha he e is a ac o ha a ec s he a es o e u n and is no included in he model. An analysis o he esul s o po olios so ed acco ding o sol ency shows ha hey di e signi ican ly depending on he adop ed sol ency a io. In addi ion, o he CAPM model, only h ee o he 50 cons an e ms a e s a is ically signi ican , while in he case o he Fama–F ench model, 30% o he cons an e ms show s a is ical signi icance. The au ho s ha e concluded ha sol ency does no in luence he a es o e u n o companies on he Wa saw S ock Exchange. The a icles p esen ed abo e discuss a wide ange o ac o s ha may a ec he a e o e u ns on equi y as well as highligh ing he b oad scope o me hodology ha is used in his ype o analysis. The p edominan me hod is he heo y o Fama–F ench and he wo-s ep eg ession o Fama–MacBe h. A common ea u e o mos o he s udies ou lined in his sec ion is he conside a ion o he impac o a company’s liquidi y o sol ency on e u ns on sha es. The au ho s apply a ious measu es o explo e his phenomenon, bu o mos o he s udies, i can be seen ha aking in o accoun such an es ima o inc eases he explana o y powe o he model. In he case o a icles analysing he Wa saw S ock Exchange, an unambiguous ela ionship has no been iden i ied, bu i is s ill an e ol ing opic ha is wo h in es iga ing as he s ock ma ke and he coun y’s economy de elop. Fu he mo e, augmen ing he li e a u e wi h an analysis o he impac o mo e liquidi y and sol ency a ios is s ill an open ques ion. I seems pa icula ly in e es ing o es ima e he CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 206 impac o es ima o s ha ha e no ye been analysed on he a es o e u n on equi y o companies lis ed on he Wa saw S ock Exchange wi h he help o he Fama and F ench ac o s. 4 Analysis o he impac o liquidi y and sol ency on he a es o e u n o companies on he Wa saw S ock Exchange Based on he li e a u e on he ela ionship be ween liquidi y and sol ency and he e u ns o companies lis ed on he Wa saw S ock Exchange, he e is s ill oom o u he esea ch. As men ioned ea lie , al hough esea che s ha e no ye iden i ied an unambiguous ela ionship in his ega d, such a ela ionship may s ill become es ablished as he Wa saw S ock Exchange con inues o de elop and he coun y’s economic sys em ans o ms. Medha (2014) has p o ed ha o companies lis ed on Ame ican s ock exchanges, e en he leas -sol en i ms s ill hold an amoun o cash ha is su icien o hem o se le hei sho - e m liabili ies. Poland is a less-de eloped ma ke han he Uni ed S a es; howe e , i is desc ibed as he mos de eloped one in i s egion. The e o e, i is in e es ing o check whe he companies om he Wa saw S ock Exchange hold su icien cash o co e hei sho - e m liabili ies, e en a he highes le el o insol ency. Hence, he i s main hypo hesis ha we a e going o es in his s udy s a es ha companies a isk o bank up cy a e able o mee hei sho - e m obliga ions. Ano he hypo hesis is ela ed o he pape by Lischewski and Vo onko a (2012), in which, based on non- inancial liquidi y and sol ency measu es, i has been ound ha hese a ios do no ha e a signi ican impac on he e u ns o companies lis ed on he Wa saw S ock Exchange. The e o e, ou second hypo hesis s a es ha liquidi y and sol ency measu ed by inancial a ios signi ican ly a ec he sensi i i y o he a e o e u ns on s ocks o isk ac o s exp essed in he CAPM, Fama–F ench and Ca ha models. The conclusion by Lischewski and Vo onko a (2012) is ha he ola ili y o he esul s o asse alua ion models depends on he adop ed sol ency o liquidi y a io. The e o e, aking in o accoun he sol ency and liquidi y a ios ha do no appea in he discussed li e a u e and examining hei impac on he a es o e u ns on equi y o companies lis ed on he Wa saw S ock Exchange is ce ainly he dis inguishing aspec o he s udy desc ibed in his pape . The desc ip ion o his s udy is di ided in o h ee pa s. The i s sec ion con ains he p esen a ion o da a and hei p elimina y analysis. The nex pa desc ibes he deployed me hodology. The las sec ion con ains he indings and conclusions o he esea ch di ided in o wo s ages. The pu pose o he i s s age is o illus a e how he alues o be a a iables om he CAPM model change o e ime depending on he po olios c ea ed on he basis o liquidi y and sol ency a ios. The second s age aims o examine he impac o isk ac o s included in he CAPM, Fama–F ench and Ca ha models o po olios buil he same way. 4.1 Da a desc ip ion This empi ical s udy was conduc ed o companies lis ed on he Wa saw S ock Exchange in he pe iod om 1 Janua y 1999 o 30 June 2013. I equi ed de ining he isk- ee a e and ma ke index o Poland. In p ac ice, mos o en, he isk- ee a e is assumed as he yield on T easu y bonds o he in e -bank ma ke a e (e.g. Wa saw In e bank O e Ra e [WIBOR]) (Jajuga and Jajuga, 2006). Howe e , i should be emembe ed ha e en easu y secu i ies a e no isk- ee, so when speaking abou a isk- ee a e, we mus adop he a e wi h he lowes possible isk a a gi en ime among he a ious ypes o inancial asse s. This a icle adop s WIBOR3M as he isk- ee a e. Addi ionally, he ob ained esul s we e con i med agains he p o i abili y o 5-yea o 10-yea T easu y bonds. The ma ke index is Wa szawski Indeks Giełdowy (Wa saw S ock Exchange Index o WIG).7 The alues o he ac o s MKT, SMB, HML and WML8 come om ou own calcula ions conduc ed o he pu pose o his a icle. The s udy used h ee liquidi y a ios and ou company sol ency a ios (Table 1). 7  WIGisalsousedasama ke indexbyCzapkiewiczand Wój owicz (2014), Waszczuk (2013) and Lischewski and Vo onko a(2012). 8  MKT-ma ke  ac o a  imek in acco dance wi h Fama and F ench (1992); SMB - company size ac o a ime k in acco dance wi h Fama and F ench (1992); HML - ac o o acompany’sbook alue oi sma ke  aluea  imek in acco dance wi h Fama and F ench (1992); WML – he momen um ac o a ime k in acco dance wi h Fama and F ench (1992). CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 213 Pe cen ile o Al man’s Z-sco e Pe cen ile o he cu en a io Mean/median o he be a coe icien Mean/median o he be a coe icien Mean/median o he be a coe icien Mean/median o he be a coe icien Mean/median o he be a coe icien Mean/median o he be a coe icien Pe cen ile o he le e age a io Pe cen ile o he ne wo king capi al a io Le e age a io and mon hly be a Ne wo king capi al a io and mon hly be a Pe cen ile o he ixed asse co e age a io Pe cen ile o he quick a io Fixed asse co e age a io and mon hly be a The quick a io and mon hly be a Cu en a io and mon hly be a Al man’s Z-sco e and mon hly be a Jus yna Zalewska, Na alia Neh ebecka (2020) Mean/median o he be a coe icien Pe cen ile o he deb a io Deb a io and mon hly be a Deb a io and mon hly be a Fig. 5: Liquidi y and sol ency a ios e sus mon hly be a. Sou ce: Zalewska and Neh ebecka (2020). CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 214 whe e ´ ,jk R – mean a e o e u n on po olio j in ime k; ´ k R – a e age isk- ee a e a ime k; ,jk R σ - s anda d de ia ion o he a es o e u n on po olio j. The Sha pe a io (Pa e son, 2011) allows us o assess whe he he e u n on in es men compensa es o he isk incu ed by he in es o . I is he a io o he di e ence be ween he a e age a e o e u n on in es men and he a e age isk- ee a e o e u n o he s anda d de ia ion o he a es o e u n on in es men . The e o e, he highe his a io is, he mo e a ou able he in es men should be. Tables 2–8 show he esul s o he es ima ed models. Fo each measu e, alpha coe icien s om CAPM, Fama–F ench and Ca ha models, he be a coe icien om he CAPM model and he Sha pe a io we e p esen ed. On he le side o he able, we can see he esul s es ima ed by he leas -squa es me hod. On he igh , he e a e he esul s o quan ile eg ession. The ou comes o his pa o he analysis demons a e ha he be a coe icien s om he CAPM model a e posi i e, close o uni y and s a is ically signi ican o each model o all liquidi y and sol ency a ios. In each case, hey had alues >0.7, and 76% o hem we e >0.9. Howe e , as in he i s s ep o he esea ch, he e also, no clea end in he beha iou o be a depending on he pe cen ile o he liquidi y a io o sol ency o he company has been iden i ied. Medha ’s (2014) conclusion abou he mono onic end in be a alues ac oss liquidi y po olios has no been suppo ed. Po olios buil on he basis o sol ency a ios a e, he e o e, sensi i e o ma ke isk; hei e u ns beha e almos he same as, o e en mo e han, he p o i a e o he en i e ma ke . The e is no mono onic (nega i e o posi i e) ela ionship be ween he inc ease o dec ease in sol ency and he le el o company sensi i i y o ma ke isk. As o he alpha coe icien s, only ou o hem (9.5%) a e di e en om ze o a he signi icance le el o 0.05. Mo eo e , a small pe cen age o signi ican a ios we e iden i ied o SMB, HML and WML isk ac o s.15 The e we e 14%, 29% and 21% coe icien s di e en om ze o, espec i ely, a he 0.05 signi icance le el. 15 The SMB ac o is a company size ac o , HML is a ac o associa ed wi h anomalies in he a io o a company’s book alue oi sma ke  alue,andWMLis heso-called momen um ac o . Tab. 2: Po olios c ea ed o he cu en a io: models es ima ed wi h he leas -squa es me hod (le ) and quan ile eg ession ( igh ). 123 456 78910 1 2 3 4 5 6 7 8 9 10 CAPM α –0.019 0.008 –0.004 0.009 0.02** 0.006 0.009 0.018* –0.003 –0.006 –0.018** 0.001 –0.008 0.013** 0.020 –0.006 0.004 0.012 –0.005 –0.007 FF α –0.022 0.008 –0.005 0.011 0.022** 0.008 0.009 0.015 –0.001 –0.004 –0.020** –0.003 –0.012** 0.023*** 0.031 –0.007 0.005 0.008 –0.005 –0.004 Ca ha α –0.023 0.004 –0.004 0.016 0.022** 0.005 0.004 0.013 –0.006 –0.005 –0.011 –0.001 –0.011** 0.024*** 0.033 –0.009 –0.001 0.007 –0.006 –0.001 CAPM β 1.116*** 1.120*** 1.036*** 1.09*** 1.191*** 1.042*** 1.106*** 1.179*** 1.052*** 0.954*** 1.006*** 1.087*** 1.014*** 1.162*** 1.14*** 0.966*** 1.119*** 1.169*** 1.008*** 0.889*** l. qua e 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 The Sha pe a io –0.981 –0.810 –1.083 –0.819 –0.746 –1.002 –0.89 –0.735 –0.939 –0.945 –0.982 –0.811 –1.083 –0.819 –0.746 –1.002 –0.89 –0.735 –0.939 –0.945 No es: CAPM α - he alpha coe icien (absolu e e m) om he CAPM model; FF α - he alpha coe icien (absolu e e m) om he Fama–F ench model; Ca ha α - he alpha coe icien (absolu e e m) om he Ca ha model; CAPM β - be a coe icien om he CAPM model; l. qua e – he numbe o qua e s; The Sha pe a io.- , ´´ , - R Sha pe = ójk jk k R R whe e ´ ,jk R – mean a e o e u n on po olio j in ime k; ´ k R – a e age isk- ee a e a ime k; ,jk R σ - s anda d de ia ion o he a es o e u n on po olio j. Sou ce: Zalewska and Neh ebecka (2020). CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 215 Tab . 3. Po olios c ea ed o he Al man Z-sco e: models es ima ed wi h he leas -squa es me hod (le ) and quan ile eg ession ( igh ) 12345678910 12345678910 CAPM α –0.019 0.008 –0.004 0.009 0.02 0.006 0.009* 0.018** –0.003 –0.006 –0.018** 0.001 –0.008 0.013 0.020** –0.006 0.004 0.012 –0.005 –0.007 FF α –0.023 0.008 –0.005 0.012 0.022 0.008 0.009** 0.015** –0.001 –0.004 –0.020** –0.003 –0.012 0.023** 0.031*** –0.007 0.005 0.008 –0.005 –0.004 Ca ha α –0.024 0.004 –0.004 0.016 0.022 0.005 0.004** 0.013 –0.006 –0.005 –0.011 –0.001 –0.011 0.024** 0.033***–0.009 –0.001 0.007 –0.006 –0.001 CAPM β 1.116*** 1.120*** 1.036*** 1.09*** 1.191*** 1.042*** 1.106*** 1.179*** 1.052*** 0.954*** 1.006*** 1.087*** 1.014*** 1.162*** 1.14*** 0.966***1.119*** 1.169*** 1.008***0.889*** l. qua e 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 The Sha pe a io –0.982 –0.811 –1.083 –0.819 –0.746 –1.002 –0.89 –0.735 –0.939 –0.945 –0.982 –0.811 –1.083 –0.819 –0.746 –1.002 –0.89 –0.735 –0.939 –0.945 No es: CAPM α - he alpha coe icien (absolu e e m) om he CAPM model; FF α - he alpha coe icien (absolu e e m) om he Fama–F ench model; Ca ha α - he alpha coe icien (absolu e e m) om he Ca ha model; CAPM β - be a coe icien om he CAPM model; l. qua e – he numbe o qua e s; The Sha pe a io. Sou ce: Zalewska and Neh ebecka (2020). Tab . 4: Po olios c ea ed o he le e age a io: models es ima ed wi h he leas -squa es me hod (le ) and quan ile eg ession ( igh ). 12345678910 12345678910 CAPM α –0.01 –0.014 –0.006 0.006 –0.002 0.002 0.02** 0.014* 0.014 0.012 –0.005 –0.017* –0.010 –0.002 –0.008 –0.002 0.008 0.009 0.013 0.018* FF α –0.014 –0.013 –0.006 0.006 –0.001 0.004 0.021** 0.014 0.016 0.013 –0.008 –0.015 –0.010 0.005 –0.005 0.00 0.012* 0.016 0.017 0.016 Ca ha α –0.015 –0.015 –0.002 0.006 –0.006 –0.003 0.018* 0.014* 0.009 0.012 –0.016 –0.017 –0.013 0.005 –0.01 0.002 0.007 0.017 0.001 0.021* CAPM β 1.206***0.989***1.042***1.064***1.025*** 1.076*** 1.151*** 1.237***1.147*** 1.082*** 1.083*** 0.925*** 1.026*** 1.022*** 0.928***1.038*** 1.183*** 1.161*** 1.133*** 1.129*** l. qua e 71 70 70 70 70 70 70 70 70 70 71 70 70 70 70 70 70 70 70 70 The Sha pe a io –0.846 –0.994 –0.999 –0.917 –1.072 –0.799 –0.741 –0.924 –0.777 –0.791 –0.846 –0.994 –0.999 –0.917 –1.072 –0.799 –0.741 –0.924 –0.777 –0.791 No es: CAPM α - he alpha coe icien (absolu e e m) om he CAPM model; FF α - he alpha coe icien (absolu e e m) om he Fama–F ench model; Ca ha α - he alpha coe icien (absolu e e m) om he Ca ha model; CAPM β - be a coe icien om he CAPM model; l. qua e – he numbe o qua e s; The Sha pe a io. Sou ce: Zalewska and Neh ebecka (2020). CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 216 Tab . 5: Po olios c ea ed o he ne wo king capi al a io: models es ima ed wi h he leas -squa es me hod (le ) and quan ile eg ession ( igh ). 12345678910 12345678910 CAPM α –0.01 –0.014 –0.006 0.006 –0.002 0.002 0.02** 0.014* 0.014 0.012 –0.005 –0.017* –0.010 –0.002 –0.008 –0.002 0.008 0.009 0.013 0.018* FF α –0.014 –0.013 –0.006 0.006 –0.001 0.004 0.021** 0.014 0.016 0.013 –0.008 –0.015 –0.010 0.005 –0.005 0.00 0.012* 0.016 0.017 0.016 Ca ha α –0.015 –0.015 –0.002 0.006 –0.006 –0.003 0.018* 0.014* 0.009 0.012 –0.016 –0.017 –0.013 0.005 –0.01 0.002 0.007 0.017 0.001 0.021* CAPM β 1.206***0.989***1.042***1.064***1.025*** 1.076*** 1.151*** 1.237***1.147*** 1.082*** 1.083*** 0.925*** 1.026*** 1.022*** 0.928***1.038*** 1.183*** 1.161*** 1.133*** 1.129*** l. qua e 71 70 70 70 70 70 70 70 70 70 71 70 70 70 70 70 70 70 70 70 The Sha pe a io –0.846 –0.994 –0.999 –0.917 –1.072 –0.799 –0.741 –0.924 –0.777 –0.791 –0.846 –0.994 –0.999 –0.917 –1.072 –0.799 –0.741 –0.924 –0.777 –0.791 No es: CAPM α - he alpha coe icien (absolu e e m) om he CAPM model; FF α - he alpha coe icien (absolu e e m) om he Fama–F ench model; Ca ha α - he alpha coe icien (absolu e e m) om he Ca ha model; CAPM β - be a coe icien om he CAPM model; l. qua e – he numbe o qua e s; The Sha pe a io. Sou ce: Zalewska and Neh ebecka (2020). Tab . 6: Po olios c ea ed o he ixed asse co e age a io: models es ima ed wi h he leas -squa es me hod (le ) and quan ile eg ession ( igh ). 12345678910 1 2345678910 CAPM α 0.001 –0.006 –0.007 –0.021** 0.009 0.005 0.01 0.009 0.020** 0.019** 0.0009 –0.0060 –0.0066 –0.0146** –0.0056 0.0076 0.0035 0.0068 0.0029 0.0226*** FF α 0.000 –0.008 –0.008 –0.022** 0.009 0.007 0.01 0.012 0.021** 0.019** 0.0060 0.0003 –0.0062 –0.0144 –0.0032 0.0085 –0.0061 0.0081 0.0017 0.0230* Ca ha α –0.010 0.000 –0.006 –0.02* 0.006 0.003 0.003 0.006 0.016* 0.019** 0.0017 –0.0093 –0.0036 –0.0168 –0.0003 0.0050 0.0039 0.0029 0.0020 0.0193* CAPM β 1.124*** 1.222*** 0.991*** 0.79*** 1.206*** 1.115*** 1.036*** 1.178*** 1.146*** 1.140*** 0.9565*** 1.1808*** 0.9423***0.8546***1.0591*** 1.0635***1.0244***0.9384***0.9605***1.2871*** l. qua e 71 71 71 71 71 71 71 71 71 71 68 68 68 68 68 68 68 68 68 68 The Sha pe a io –0.804 –0.964 –1.176 –1.078 –0.934 –0.943 –0.857 –0.874 –0.749 –0.751 –0.7080 –0.8980 –1.0539 –0.9753 –0.8742 –0.8429 –0.7425 –0.7612 –0.6419 –0.6570 No es: CAPM α - he alpha coe icien (absolu e e m) om he CAPM model; FF α - he alpha coe icien (absolu e e m) om he Fama–F ench model; Ca ha α - he alpha coe icien (absolu e e m) om he Ca ha model; CAPM β - be a coe icien om he CAPM model; l. qua e – he numbe o qua e s; The Sha pe a io. Sou ce: Zalewska and Neh ebecka (2020). CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 217 Tab . 7: Po olios c ea ed o he deb a io: models es ima ed wi h he leas -squa es me hod (le ) and quan ile eg ession ( igh ). 12345678910 12345678910 CAPM α –0.0040 –0.0062 –0.0101 –0.0014 0.0124 0.0028 –0.0008 0.0186* 0.0036 0.0035 –0.0111 –0.0148 –0.0014 –0.0045 0.0107 0.0021 –0.0025 0.0091 –0.0043 –0.0049 FF α –0.0032 –0.0046 –0.0084 –0.0038 0.0135 0.0023 –0.0014 0.0200** 0.0036 0.0029 –0.0061 –0.0090 –0.0010 –0.0080 0.0068 0.0036 –0.0064 0.0082 0.0027 0.0134 Ca ha α –0.0059 –0.0072 –0.0082 –0.0022 0.0081 0.0104 –0.0050 0.0129 0.0024 0.0012 –0.0135 –0.0090 –0.0028 –0.0111** 0.0100 0.0030 –0.0061 0.0005 –0.0031 0.0174 CAPM β 1.0274***0.9973***0.9592***1.1079*** 1.2111*** 0.8735***0.9950***1.2436***1.1069*** 1.0808***0.9783***0.9398***0.9674***1.0267***1.0622***0.9840***0.9401***1.1629*** 1.0532***0.9523*** l. qua e 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 The Sha pe a io –1.1344 –0.8753 –1.0406 –0.8507 –0.7772 –0.8391 –1.1745 –0.7841 –0.9350 –0.7692 –1.1344 –0.8753 –1.0406 –0.8507 –0.7772 –0.8391 –1.1745 –0.7841 –0.9350 –0.7692 No es: CAPM α - he alpha coe icien (absolu e e m) om he CAPM model; FF α - he alpha coe icien (absolu e e m) om he Fama–F ench model; Ca ha α - he alpha coe icien (absolu e e m) om he Ca ha model; CAPM β - be a coe icien om he CAPM model; l. qua e – he numbe o qua e s; The Sha pe a io. Sou ce: Zalewska and Neh ebecka (2020). Tab . 8: Po olios c ea ed o he quick a io: models es ima ed wi h he leas -squa es me hod (le ) and quan ile eg ession ( igh ). 12345678910 12345678910 CAPM α –0.0050 0.0041 0.0013 0.0094 –0.0001 0.0068 0.0028 0.0269** 0.0023 –0.0133 –0.0149 0.0042 –0.0037 0.0075 –0.0111 0.0019 0.0102 0.0176 0.0021 –0.0153** FF α –0.0082 0.0068 0.0001 0.0096 0.0001 0.0074 0.0054 0.0278** 0.0030 –0.0123 –0.0177** 0.0089 –0.0052 0.0083 –0.0070 0.0066 0.0088 0.0139 0.0025 –0.0207*** Ca ha α –0.0154 0.0097 0.0005 0.0074 0.0061 0.0045 0.0014 0.0286** –0.0026 –0.0129 –0.0171* 0.0083 –0.0062 0.0030 –0.0038 0.0014 –0.0044 0.0230** 0.0031 –0.0209** CAPM β 1.3159*** 1.0246***1.0082***1.0067***1.0928***1.0718*** 1.1985*** 1.3046***1.0950***0.8759***1.1322*** 1.0193*** 0.9580***0.9929***0.9824***0.9910***1.2822***1.2463***1.1132*** 0.8773*** l. qua e 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 71 The Sha pe a io –0.8247 –0.7885 –1.0241 –0.8734 –0.9975 –0.9392 –0.9480 –0.6543 –0.9893 –0.9759 –0.8247 –0.7885 –1.0241 –0.8734 –0.9975 –0.9392 –0.9480 –0.6543 –0.9893 –0.9759 No es: CAPM α - he alpha coe icien (absolu e e m) om he CAPM model; FF α - he alpha coe icien (absolu e e m) om he Fama–F ench model; Ca ha α - he alpha coe icien (absolu e e m) om he Ca ha model; CAPM β - be a coe icien om he CAPM model; l. qua e – he numbe o qua e s; The Sha pe a io. Sou ce: Zalewska and Neh ebecka (2020). CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 218 On he o he hand, when i comes o ma ching he model o he da a, he adjus ed R2 es ima o o each o he liquidi y and sol ency a ios is he highes o he majo i y o po olios o he Fama–F ench model. On he o he hand, he Ca ha model had he wo s alues. The o al signi icance o he model pa ame e s assessed by he F- es 16 in each case sugges s he ejec ion o he null hypo hesis. This means ha o each g oup o companies so ed acco ding o liquidi y o sol ency a ios o companies lis ed on he Wa saw S ock Exchange, a leas one o he isk ac o s exp essed in he CAPM, Fama–F ench and Ca ha model is signi ican . Mos o en, i is he MKT ma ke isk ac o . The Sha pe a io, ega dless o he adop ed sol ency a io, u ned ou o be nega i e o each po olio. This means ha po olios based on he sol ency a io pe cen iles had a lowe mean a e o e u n han he isk- ee a e. The p og ession o changes in he alue o his indica o does no show a clea end. Fo all a ios excep he asse co e age a io, he Sha pe a io is <0.7 o each po olio. This obse a ion poin s o a hypo hesis ha s ock po olios based on sol ency a ios a e no a good in es men s a egy. The use o ou sol ency a ios and h ee company liquidi y a ios o ob ain a ull pic u e o he company’s condi ion ins ead o ocusing on only one o he aspec s was con i med by he conclusion o Lischewski and Vo onko a (2012) abou di e en es ima ion esul s depending on he applied ac o . The esul s change in e ms o s a is ical signi icance o he sensi i i y ac o s o he analysed isk ac o as well as o hei absolu e alues. On he o he hand, he in e ence ha he e is no mono onic and explici dependence o companies’ sensi i i y o isks exp essed in he CAPM, Fama–F ench and Ca ha models depending on he liquidi y and sol ency o he company emains alid. Based on he abo e indings, we should ejec he second hypo hesis, acco ding o which a company’s sensi i i y o isk de ined in asse p icing models signi ican ly depends on i s liquidi y and sol ency de e mined by inancial a ios. The analysis p esen ed in his sec ion does no suppo he conclusions o Medha (2014) abou he impac o liquidi y exp essed by he measu es p oposed by he esea che on he a e o e u ns on sha es o companies lis ed on he 16 The F- es hypo heses a e as ollows. The null hypo hesis is ha each o he o al model pa ame e s is equal o ze o. Howe e , he al e na i e hypo hesis assumes ha a leas one o he model pa ame e s is di e en om ze o. Wa saw S ock Exchange. A he same ime, he conclusion abou he impac o liquidi y on a es o e u n on sha es on he Wa saw S ock Exchange p opounded in he s udy by Lischewski and Vo onko a (2012) is con i med based on di e en liquidi y a ios. The e o e, i seems ha in he case o he Wa saw S ock Exchange, liquidi y and sol ency do no play such an impo an ole in shaping e u ns as in o he , mo e-ad anced ma ke s. 5 Conclusions The pu pose o ou esea ch was o analyse he impac o a ious inancial measu es assessing a company’s liquidi y and sol ency on he a es o e u n on sha es o companies lis ed on he Wa saw S ock Exchange. Acco ding o he li e a u e e iew, he e is a lo o esea ch on he a e o e u ns on sha es, which, as a ac o shaping hei ola ili y, akes in o accoun liquidi y o sol ency in he o m o a ious a ios. The i s g oup o s udies conce ned he Uni ed S a es. The publica ions p o ed ha he common opinion ha companies wi h ex ensi e cash esou ces a e mo e sol en is no ue. I was also shown ha liquidi y and sol ency a e impo an aspec s in explaining he e u n on sha es. The second g oup o analyses conce ned less-de eloped bu s ill ad anced ma ke s, such as G ea B i ain o Aus alia. The main conclusion was he signi ican impac o liquidi y and sol ency on e u ns on sha es. The esea che s concluded ha he LCAPM model is be e sui ed o he da a han he s anda d CAPM. Analyses o eme ging ma ke s (such as Nige ia and Se bia) we e also desc ibed. They do no p o ide unambiguous e idence abou he impo ance o liquidi y and sol ency o lack he eo o hese coun ies due o hei speci ic cha ac e is ics. Resea ch on Poland was also ci ed, in which no explici ela ionship was iden i ied. The esul s ob ained in ou s udy con ibu e o he de elopmen o knowledge in he discussed opic. Ou s udy e i ied wo main hypo heses. The i s main hypo hesis s a ed ha companies a isk o bank up cy a e able o mee hei sho - e m obliga ions. I was ejec ed. In he case o Al man Z-sco e, he le e age a io, he ixed asse co e age a io and he deb a io, i hey indica e a isk o bank up cy, he quick, cu en and ne wo king capi al liquidi y a ios signal a p oblem wi h he epaymen o sho - e m liabili ies. CEEJ • 6(53) • 2019 • pp. 199-220 • ISSN 2543-6821 • DOI: 10.2478/ceej-2019-0013 219 The second main hypo hesis is ha liquidi y and sol ency measu ed by inancial a ios signi ican ly a ec he sensi i i y o he a e o e u ns on sha es o isk ac o s exp essed in he CAPM, Fama–F ench and Ca ha models. Based on he e olu ion o be a- ime coe icien s om he CAPM model and po olio analysis, his hypo hesis was ejec ed. No unambiguous ela ionship was iden i ied be ween liquidi y and sol ency a ios on he one hand and he ime- a ying be a om he CAPM model, he isk es ima o s om he Fama–F ench and Ca ha models, and he alpha coe icien s om hese models. The e can be se e al easons o his. Acco ding o Lischewski and Vo onko a (2012), i may be he esul o he liquidi y suppo p og amme ope a ing on he Wa saw S ock Exchange, he speci ic na u e o he Polish economy (whe e small companies domina e on he s ock exchange) o g owing ma ke liquidi y.17 Iden i ying he eason o he desc ibed si ua ion equi es u he esea ch. Based on ou analysis, we did no check o wha ex en he indi idual aspec s o a company’s condi ion such as liquidi y, sol ency o ne wo king capi al a e adap ed o he eali ies o he Polish economy. Conside ing he ac ha he selec ion o he liquidi y o sol ency a io di e en ia es he esul s o asse p icing models, i would be necessa y o analyse he sui abili y o he a ios a ailable in he li e a u e o he Wa saw S ock Exchange. This issue equi es u he analysis. In addi ion, i seems in e es ing o examine whe he he LCAPM model is be e sui ed o he da a in he Polish ma ke han he CAPM model, as Mino ić and Ži ko ić (2012) a gue o he Se bian economy, B ad ania and Pea (2014) o he USA ma ke o Li e al. (2014) o Japan. Re e ences Acha ya, V., Se gei, A. D., Ilya, A. S. (2012). Cash holdings and c edi isk. The Re iew o Financial S udies. 25(12), 3572–3609. Amihud, Y. ,2002. Illiquidi y and s ock e u ns: c oss-sec ion and ime-se ies e ec s. 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