<p>This paper confirms that improvement in stock liquidity can enhance corporate governance by attracting professional institutional investors, thereby increasing the total factor productivity (TFP) of listed companies in the Chinese stock market. Our empirical results show that stock liquidity is significantly positively correlated with the TFP of listed companies, and this effect is stronger at listed companies with a lower ratio of managerial shareholding, a lower proportion of independent directors on the board of directors, and chairmen who do not serve as CEOs. The results remain significant to a series of robustness and endogeneity tests. Further analysis shows that the improvement of stock liquidity reduces the agency cost of listed companies by increasing the shareholding of professional institutional investors, thereby reducing production costs and raising operational efficiency, ultimately increasing TFP. More important, in the Chinese stock market, the main mechanism through which stock liquidity affects the TFP of listed companies is a governance mechanism, rather than an information mechanism. We offer a new perspective on how the stock market influences growth in firm productivity.</p>