Relationship between Readability of Financial Reports and Stock liquidity

The purpose of this paper is to review the relationship between the readability of financial reports and stock market liquidity in the companies listed at Tehran stock exchange.

This research is applied in terms of purpose and the information of 100 manufacturing companies during the 2008 to 2018 has been used. Structural equation and multiple regression approaches were used to analyze the findings.

The findings show that there is a direct and significant relation between the readability of the financial reports and stock market liquidity. In this sense, by decreasing the readability stock market liquidity is decreased. The results also show that the different measures of liquidityand readability in different industries are statistically significant differences with each other.

Increasing the awareness of the participants from publication of transparent and transparent information has special importance and Encouraging companies to publish the readable information is an important step to increase the information transparency and will increase the liquidity and the allocation efficiency of the capital market.

Contribution: 

The contribution of this research is that different criteria for stock readability and liquidity have been studied and for this purpose, structural equation modeling with partial least squares approach has been used. Also, to consider the effect of panel data, the generalized least squares approach is generalized, and to investigate the interaction between readability and liquidity, the generalized method of moments approach (by instrumental variables) is used. Finally, the readability and liquidity of different industries are compared.