Internal information asymmetry and power distance

Yingzhao Ni, Wenjie Ding, Donghui Li and Lu Xing

Research in International Business and Finance, 2024, vol. 71, issue C

Abstract: Using the difference in insider trading profitability between top and lower-level managers to proxy for firms’ internal information asymmetry, we show that power distance increases internal information asymmetry in an international sample of 10,103 firms across 22 economies from 2003 to 2018. Furthermore, we find that this positive impact is lessened for firms with less complexity, more female directors on board, or an internal CEO promoted from within the firm. Moreover, we show that a country’s high-quality formal institutions lessen the role that a country’s culture of power distance plays in escalating internal information asymmetry. Our main conclusions remain valid after taking into account robustness and endogeneity issues.

Keywords: National culture; Power distance; Internal information asymmetry; Insider trading (search for similar items in EconPapers)
JEL-codes: G30 G34 Z10 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:71:y:2024:i:c:s0275531924002708

DOI: 10.1016/j.ribaf.2024.102477

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