Abstract

According to the information economics, financial reporting reduces information asymmetry between firm and its investors and between investors themselves. Therefore, the purpose of this study is to investigate the impact of financial reporting quality on stock market liquidity of listed companies in Tehran Stock Exchange (TSE).
To achieve this aim, financial reporting quality was measured by estimating Kothari et all (2006) and McNichols (2002) accruals models. Furthermore, stock market liquidity was estimated by using Amivest liquidity ratio and Amihud illiquidity ratio. The data sample is restricted to 90 companies in the (TSE) during 1384 to 1389. In conducting this research, four main hypotheses were proposed to examine the impact of financial reporting quality on financial performance across the firms and during the designated period. Accordingly, the statistical technique known as the “Panel Data” was exerted to test the research hypothesis.
The results of the hypotheses testing demonstrate that there is not a significant relationship between measures of financial reporting quality and stock market liquidity measures even after controlling for potential confounding effects.