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The effect of information quality on liquidity risk

Journal of Accounting and Economics, ISSN: 0165-4101, Vol: 52, Issue: 2, Page: 126-143
2011
  • 125
    Citations
  • 823
    Usage
  • 271
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    125
    • Citation Indexes
      124
      • CrossRef
        59
      • Academic Citation Index (ACI) - airiti
        2
    • Policy Citations
      1
      • 1
  • Usage
    823
  • Captures
    271

Article Description

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.

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