This paper examines the relationship between liquidity and quality of financial information by analyzing long-term trends in illiquidity measure for firms that restate their financial statements. The study uses a method developed by Amihud (2002) [Amihud, Y. (2002). Illiquidity and stock returns: cross-section and time-series effects. Journal of financial markets, 5(1), 31-56.]. The original sample consists of 98 listed firms in Tehran Stock Exchange over the period [2004][2005][2006][2007][2008][2009][2010][2011]. In this study, the measurement of quality of financial information is associated with presence or absence of financial restatement cases. We find that for most income decreasing restatements illiquidity increases before restatement announcement and this increase continues after restatement announcement. Overall, our results indicate a positive relationship between quality of financial information and liquidity.
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