An investigation on the impact of interest transparency on Liquidity risk

Document Type : Research Paper

Authors

1 Associate Professor,Financial Management Tehran University

2 Assistant Professor Payame Noor University

3 Master of Financial Management Azad University of Science and Research

Abstract

The following is an investigation on the relation between the accounting profit transparency and the risk of liquidity in Tehran’s stock Market with the aim of describing proper conditions for improving the performance of the country’s stock Market. In line with this aim, the financial information of 75 listed firms whose required information was available within this research period (2003-2014) was analyzed. The results show in case of high transparency in interest, the liquidity risk of the listed firms in Tehran Stock Market would be reduced. The result is in accordance with this interpretation that the stocks of firms with higher interest transparency have less ambiguity and are requested more. In another view, the higher interest transparency, reduce information asymmetry between the investors and firm managers. This will lead to the reduction in expenses due to the improper choice in the transaction between stock buyer and sellers. Thus, the investors are keen to transact these stocks and the liquidity risk in such firms are less.

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