This study investigates whether stock liquidity and liquidity risk mediate in the relationship between information quality and the cost of equity in China. We hypothesize that better information quality lowers illiquidity and liquidity risk of a stock and thereby reduces its cost of equity. We perform mediation analysis to test the role of stock liquidity. And to test the role of liquidity risk we examine whether better information quality reduces a firm’s beta over liquidity factor in an asset pricing model also having Fama French three factors. Contrary to existing literature, our findings suggest that stock liquidity and liquidity risk do not mediate in the relationship between information quality and the cost of equity in China. We ascribe our findings
to the information consumption behavior of Chinese investors.
JEL classification: G14; G12; G11; G10
Keywords: information quality; stock liquidity; liquidity risk; cost of equity
학회소식
[2016년 제 4차] Does liquidity mediate between information quality
작성자 : 관리자
조회수 : 708
게시일 :
2016-12-21
