The effect of information quality on liquidity risk

By Jeffrey Ng. 2011

231 citations recorded by the source corpus.

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.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/2c80feebfb6e681d025499f9c25254ce0f08d74f

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Citations in the corpus

Earnings Management, Capital Structure and the Role of Institutional Environments (2016, background): “Li, Nguyen, Pham, and Wei (2011) document that the stabilizing role of foreign institutional owners to reduce firm level volatility is more pronounced in those emerging countries with better institutional environments.”
The effect of carbon risk on the cost of equity capital (2015, background): “Future research topics in line with this study include: 1) investigating whether market participants perceive carbon risk, or environmental risk broadly, as a risk factor in addition to market beta, book-to-market ratio, size and liquidity risk (Ng, 2011a,b).”
Transparency, Liquidity, and Valuation: International Evidence on When Transparency Matters Most (2012, unknown): “Jayaraman (2007) and Bhattacharya et al.”
Investor Competition Over Information and the Pricing of Information Asymmetry (2011, unknown): “Furthermore, as we describe below, this finding has implications for a large body of literature that investigates the pricing of information quality (e.g., Botosan 1997; Leuz and Verrecchia 2000; Francis et al. 2004, 2005; Core et al. 2008; Ng 2011).”
The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research (2015, background): “A recent study by Daines and Jones (2012) highlights the problems of using cross-sectional differences among affected firms.”
Transparency and Liquidity Uncertainty in Crisis Periods (2011, background): “As noted earlier, results are also robust to controlling for the correlation between firm-level returns and market liquidity discussed in Pastor and Stambaugh (2003) and Ng (2008).”