Firm opacity and financial market information asymmetry

Rahul Ravi and Youna Hong

Journal of Empirical Finance, 2014, vol. 25, issue C, 83-94

Abstract: Information asymmetry could exist between the firm and the investors as well as among investors. If the information asymmetry between the firm and the investors is very high, all investors are largely uninformed, so information asymmetry between investors should be low. At the other extreme, if all investors are fully informed about the firm, again the information asymmetry between investors should be low. This paper finds evidence supporting such a nonlinear relationship between firm-to-investor and investor-to-investor information asymmetry. The inter-investor information asymmetry increases, and then declines, as the information asymmetry between the firm and the investor increases.

Keywords: Information asymmetry; Firm opacity; Disclosure quality (search for similar items in EconPapers)
JEL-codes: D82 G19 M40 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:25:y:2014:i:c:p:83-94

DOI: 10.1016/j.jempfin.2013.11.007

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