The relationship between earnings quality and liquidity risk

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Abstract

Abstract: This research invetigates the relationship between earnings quality and liquidity risk. Earnings quality is measured using three different proxies: earnings persistence, value relevance, and accrual quality. Liquidity risk is also defined as the sensitivity of stock returns to unexpected changes in market liquidity and, in this research, is measured through the model introduced by Weil. The examination of the relationship between earnings quality and liquidity risk by using the data from 71 firms during the period from 1385 to 1389 indicates that there is a significant, negative relationship between accrual quality, as a proxy of earnings quality, and liquidity risk. However, the results indicate no significant relationship of earnings persistence and value relevance, as the proxies of earnings quality, with liquidity risk.

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References

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History

  • Receive Date: 11 September 2013
  • Revise Date: 30 January 2021
  • Accept Date: 19 July 2014

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