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The main purpose of this paper is to argue the extent that earnings management lowers disclosure quality. It should increase information asymmetry and impair trading liquidity. Using a large sample of NYSE firms from 1996 to 2001, we find evidence to suggest that firms which exhibit greater earnings management are associated with lower market liquidity. Our results are robust to both real and accounting based measures of earnings management and two well established measures of market liquidity. However, they are not consistent with the Easley et al. probability of informed trade measure.

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