The Effect of Liquidity Risk on the Relationship between Information Quality and Cost of Capital

The changes in stock liquidity capability lead to fluctuations in shareholders' expectations and investors' demand will be lower for stocks with liquidity uncertainty. The goal of this paper is to investigate the interactive effect of liquidity risk on the relationship of information quality and cost of capital. For this purpose, the data of the selected companies listed in the Tehran Stock Exchange for the period of 2008 to 2016 were extracted and a regression model of cross-sectional data was used to test the research hypotheses.  After gathering data and its analyzing, the results of this study indicate an inverse relationship between information quality and liquidity risk. Also, the research results indicate that the impact of information quality on capital costs has changed and affected by the risk involved, that is, the greater the quality of information, the liquidity risk of liquidity decreases and the cost reduction of capital is realized..