Abstract: This paper employs factor analysis to extract six characteristics of financial performance from 11 financial indicators, such as debt service level, profitability, operating status, cash flow, development potential, innovation ability based on the database including 290 GEM listed companies. The six characteristics of financial performance are utilized as independent variables, individual stock liquidity is used as dependent variable, and the degree of business diversification is used as moderator to develop multiple regression models. The empirical study shows that the size of assets, the number of shares outstanding, the ability to innovate, and the level of cash flow of GEM listed companies can significantly affect the liquidity of individual stock. And the degree of business diversification can enhance the effect of the financial performance characteristics on the liquidity of individual stock effectively. And listed companies’ financial performance indicators contain value information. Investors should pay more attention to companies’ financial information and use it effectively when making investment decisions. GEM listed companies can improve the level of individual stock liquidity by changing their financial performance and the degree of business diversification.

Key words: financial performance characteristics, stock liquidity, degree of business diversification, GEM listed companies, regulatory effect