Publication Type
Journal Article
Publication Date
11-2011
Abstract
I investigate whether information quality affects the cost of equity capital through liquidity risk. Liquidity risk is the sensitivity of stock returns to unexpected changes in market liquidity; recent asset pricing literature has emphasized the importance of this systematic risk. I find that higher information quality is associated with lower liquidity risk and that the reduction in cost of capital due to this association is economically significant. I also find that the negative association between information quality and liquidity risk is stronger in times of large shocks to market liquidity.
Keywords
Information quality, Earnings quality, Liquidity risk, Cost of capital, Disclosure
Discipline
Accounting | Portfolio and Security Analysis
Research Areas
Financial Performance Analysis
Publication
Journal of Accounting and Economics
Volume
52
Issue
2-3
First Page
126
Last Page
143
ISSN
0165-4101
Identifier
10.1016/j.jacceco.2011.03.004
Publisher
Elsevier
Citation
NG, Jeffrey.
The Effect of Information Quality on Liquidity Risk. (2011). Journal of Accounting and Economics. 52, (2-3), 126-143.
Available at: https://ink.library.smu.edu.sg/soa_research/877
Creative Commons License
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