How research contributes to higher liquidity?

Market efficiency has been in the spotlight for more than 50 years, since Fama introduced the Efficient Market Hypothesis. This is especially important from the point of view of information asymmetry, as stock market investors have information disadvantage compared to insiders which may result in higher financing costs for companies and lower IPO prices. However, a wide analyst base, the presence of local analysts and transparency decreases funding costs for the companies, which also leads to higher interest from investors in companies’ financial assets. Companies which have low research coverage face excess funding costs compared to companies with wider analyst coverage.