This paper investigates the relationship between stock liquidity and free cash flows growth of 2280 firms from 2000 to 2022. Using various indicators of stock liquidity and free cash flow growth, as well as firm size, firm performance, level of debt, and market-to-book ratio as control variables, the paper implements panel data regression to test the relationship. The paper finds that free cash flow growth has a negative significant impact on the stock liquidity while investing cash flow and financing cash flow have positive effects on stock liquidity. To test the result’s credibility, the regressions were examined alternatively with three proxies – fixed asset growth, total asset growth, and Bid-Ask spread. The paper also finds that operating cash flow has an inconsistent effect on stock liquidity across models. The paper further finds that all the control variables have significant effects on stock liquidity in all models, except for market to book ratio in one model. The paper concludes that the relationship between stock liquidity and cash flows is complex and depends on the source and use of cash flows, as well as the characteristics of the firms.

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