The article explores how changes in funding availability affect stock market liquidity. Before Korea adopted the Basel III accord, positive funding shocks boosted market liquidity for medium-sized firms, while negative shocks did the same for large and small firms. After the accord, changes in funding liquidity came before changes in market liquidity. This shift was due to how domestic investors reacted to funding shocks. When funding liquidity improved, domestic investors provided liquidity for the whole market, while foreigners mainly traded shares of small firms in response to funding shocks.