We ask whether the quality of internal information matters for investment decisions. We predict that investment is more sensitive to internal profit signals and less sensitive to external price signals when managers have higher quality internal information. Consistent with recent theoretical and...

To answer the question what causes an asset to be illiquid, we analyze the impact that transparency of corporate accounting information has on the liquidity of its traded bonds. In particular, we focus on how this relationship depends on aggregate liquidity and the financial state of the firm....