Transparency and Liquidity Uncertainty in Crisis Periods
Mark H. Lang
University of North Carolina at Chapel Hill
Mark G. Maffett
University of Chicago - Booth School of Business
July 1, 2011
Journal of Accounting & Economics (JAE), Vol. 52, pp. 101-125, 2011
Fifth Singapore International Conference on Finance 2011
We document, for a global sample, that firms with greater transparency (based on accounting standards, auditor choice, earnings management, analyst following and forecast accuracy) experience less liquidity volatility, fewer extreme illiquidity events and lower correlations between firm-level liquidity and both market liquidity and market returns. Results are robust to numerous sensitivity analyses, including controls for endogeneity and propensity matching. Results are particularly pronounced during crises, when liquidity variances, covariances and extreme illiquidity events increase substantially, but less so for transparent firms. Finally, liquidity variance, covariance and the frequency of extreme illiquidity events are all negatively correlated with Tobin’s Q.
Number of Pages in PDF File: 58
Keywords: Liquidity, Transparency, Financial Crises, Commonality, International Accounting
JEL Classification: G01, G15, G30Accepted Paper Series
Date posted: March 7, 2010 ; Last revised: September 19, 2012
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.578 seconds