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Title: Quality of Accounting Information and Liquidity Risk
Source: International Conference on Engineering and Business Management 2012(Part 4 Urban Management and Financial Investment) (pp 2839-2842)
Author(s): Sheng Xu, Renmin University of China, Beijing, China, 100872;Zhongnan University of Economics and Law, Wuhan, China, 430073
Yuan Li, Zhongnan University of Economics and Law, Wuhan, China, 430073
Yu Li, Zhongnan University of Economics and Law, Wuhan, China, 430073
Abstract: On the basis of the information quality theory, illiquidity factor constructed by Amihud and the three-factor model proposed by Fama and French, we made some adjustments on the approaches proposed by Pastor and Stambaugh(2003) and Jeffy Ng(2011) to investigate the relationship between accounting information quality and liquidity risk in China’s stock market. The empirical evidence suggests that there is a negative effect of accounting information quality on liquidity risk, the improvement of accounting quality can reduce the liquidity risk, and it can also reduce the cost of equity for there is a positive relationship between liquidity risk and cost of equity.
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