Investors are reluctant to trade in the high-information-asymmetry days before earnings announcements. We show that the decrease in liquidity trading before announcements is asymmetric. We analyze buy and sell orders of investors with passive investment strategies, and find they do not reduce...

We show that stock market liquidity affects subsequent corporate investment and production. Stock illiquidity, which raises the firm's cost of capital, lowers investment in capital assets, R&D, and inventory. This effect holds regardless of the firms' financially constraints. Consequently,...