Foreign competition for shares and the pricing of information asymmetry: Evidence from equity market liberalization

Karthik Balakrishnan, Rahul Vashishtha and Robert E. Verrecchia

Journal of Accounting and Economics, 2019, vol. 67, issue 1, 80-97

Abstract: Using the equity market liberalization of 23 emerging market countries between 1996 and 2006, we examine how the degree of competition for a firm's shares affects the price of information asymmetry. We find evidence of a significant decline in the pricing of information asymmetry as countries remove regulatory restrictions on foreign ownership. Our study provides novel evidence on the link between the degree of competitiveness of equity markets and the price of information asymmetry. The work also furthers our understanding of the economic consequences of foreign stock ownership.

Keywords: Pricing of information asymmetry; Cost of capital; Competition; Information quality; Foreign investors (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:67:y:2019:i:1:p:80-97

DOI: 10.1016/j.jacceco.2018.08.015

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