The effect of information quality on liquidity risk
Author(s)Ng, Tee Yong
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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.
DepartmentSloan School of Management
Journal of Accounting and Economics
Ng, Jeffrey. “The Effect of Information Quality on Liquidity Risk.” Journal of Accounting and Economics 52, no. 2–3 (November 2011): 126–143.
Author's final manuscript