18 Pages Posted: 14 Aug 2011 Last revised: 26 Aug 2011
Date Written: July 27, 2011
This paper highlights the different avenues through which stock liquidity can potentially transcend into accounting research. Recently, Lang and Maffett show that transparency reduces firm-level liquidity uncertainty, while Ng shows that increased information quality can reduce a firm's exposure to systematic liquidity risk. These studies respectively suggest that accounting variables can affect firm valuation and cost-of-capital through their impact on different aspects of liquidity. Although some doubt may arise about the economic significance of such effects on average, further evidence from the recent financial crisis presented in this paper confirms the important role of accounting information during liquidity events.
Keywords: Liquidity Risk, Trasparency, Information Quality, Asset Pricing, Financial Crisis
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Sadka, Ronnie, Liquidity Risk and Accounting Information (July 27, 2011). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1909078
By Pingyang Gao