There is a lot of information asymmetry in the market today. Sellers in most cases have superior information over buyers and as a result beat market logistics to make as much profits as possible at the expense of buyers. Information asymmetry among market participants translate into high transaction costs and lower liquidity in the markets. Having superior information over other market participants lead to unfair competition in the market, especially in the stock markets due to insider trading. In a firm set up, I. A occurs when a manager in charge of planning and implementation of important decisions for achievement of firm’s objectives has superior information over owners, who are shareholders of the company. Managers are at discretion to make decisions without necessarily involving inputs from shareholders of the firm because they are charged with full responsibility of running affairs of the firm. This paper analyzes and tests effects of information asymmetry on firm performance at a micro-level. We analyse this paper using panel data, precisely financial statements from companies listed on the New York Stock market for a period of ten years. Using the same data we regress the model to estimate the effect level on firm performance. Fixed effects test is estimated and inference is based on significant level or p-value thus likely that less than 0.05 is rejected at a 95% confidence level, less than 0.01 is rejected at 99% confidence level and less than 0.1 is rejected at 90% confidence level. The results however show that information asymmetry is significant at 10% indicating it has effect on firm performance. However on regressing return on assets on other variables, results indicate that information asymmetry is significant at both 5% and 10% significant level.
| Published in | International Journal of Economics, Finance and Management Sciences (Volume 8, Issue 2) |
| DOI | 10.11648/j.ijefm.20200802.12 |
| Page(s) | 75-83 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2020. Published by Science Publishing Group |
Information Asymmetry (IA), Principle-Agency Costs (PA), Socially Responsible Investment (SRI), Earnings Management, Turnover, Spread (Bid-ask Spread), Generally Accepted Accounting Principles (GAAP)
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APA Style
Anne Khatali. (2020). Identifying Effects of Information Asymmetry on Firm Performance. International Journal of Economics, Finance and Management Sciences, 8(2), 75-83. https://doi.org/10.11648/j.ijefm.20200802.12
ACS Style
Anne Khatali. Identifying Effects of Information Asymmetry on Firm Performance. Int. J. Econ. Finance Manag. Sci. 2020, 8(2), 75-83. doi: 10.11648/j.ijefm.20200802.12
AMA Style
Anne Khatali. Identifying Effects of Information Asymmetry on Firm Performance. Int J Econ Finance Manag Sci. 2020;8(2):75-83. doi: 10.11648/j.ijefm.20200802.12
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Download@article{10.11648/j.ijefm.20200802.12,
author = {Anne Khatali},
title = {Identifying Effects of Information Asymmetry on Firm Performance},
journal = {International Journal of Economics, Finance and Management Sciences},
volume = {8},
number = {2},
pages = {75-83},
doi = {10.11648/j.ijefm.20200802.12},
url = {https://doi.org/10.11648/j.ijefm.20200802.12},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20200802.12},
abstract = {There is a lot of information asymmetry in the market today. Sellers in most cases have superior information over buyers and as a result beat market logistics to make as much profits as possible at the expense of buyers. Information asymmetry among market participants translate into high transaction costs and lower liquidity in the markets. Having superior information over other market participants lead to unfair competition in the market, especially in the stock markets due to insider trading. In a firm set up, I. A occurs when a manager in charge of planning and implementation of important decisions for achievement of firm’s objectives has superior information over owners, who are shareholders of the company. Managers are at discretion to make decisions without necessarily involving inputs from shareholders of the firm because they are charged with full responsibility of running affairs of the firm. This paper analyzes and tests effects of information asymmetry on firm performance at a micro-level. We analyse this paper using panel data, precisely financial statements from companies listed on the New York Stock market for a period of ten years. Using the same data we regress the model to estimate the effect level on firm performance. Fixed effects test is estimated and inference is based on significant level or p-value thus likely that less than 0.05 is rejected at a 95% confidence level, less than 0.01 is rejected at 99% confidence level and less than 0.1 is rejected at 90% confidence level. The results however show that information asymmetry is significant at 10% indicating it has effect on firm performance. However on regressing return on assets on other variables, results indicate that information asymmetry is significant at both 5% and 10% significant level.},
year = {2020}
}
TY - JOUR T1 - Identifying Effects of Information Asymmetry on Firm Performance AU - Anne Khatali Y1 - 2020/05/28 PY - 2020 N1 - https://doi.org/10.11648/j.ijefm.20200802.12 DO - 10.11648/j.ijefm.20200802.12 T2 - International Journal of Economics, Finance and Management Sciences JF - International Journal of Economics, Finance and Management Sciences JO - International Journal of Economics, Finance and Management Sciences SP - 75 EP - 83 PB - Science Publishing Group SN - 2326-9561 UR - https://doi.org/10.11648/j.ijefm.20200802.12 AB - There is a lot of information asymmetry in the market today. Sellers in most cases have superior information over buyers and as a result beat market logistics to make as much profits as possible at the expense of buyers. Information asymmetry among market participants translate into high transaction costs and lower liquidity in the markets. Having superior information over other market participants lead to unfair competition in the market, especially in the stock markets due to insider trading. In a firm set up, I. A occurs when a manager in charge of planning and implementation of important decisions for achievement of firm’s objectives has superior information over owners, who are shareholders of the company. Managers are at discretion to make decisions without necessarily involving inputs from shareholders of the firm because they are charged with full responsibility of running affairs of the firm. This paper analyzes and tests effects of information asymmetry on firm performance at a micro-level. We analyse this paper using panel data, precisely financial statements from companies listed on the New York Stock market for a period of ten years. Using the same data we regress the model to estimate the effect level on firm performance. Fixed effects test is estimated and inference is based on significant level or p-value thus likely that less than 0.05 is rejected at a 95% confidence level, less than 0.01 is rejected at 99% confidence level and less than 0.1 is rejected at 90% confidence level. The results however show that information asymmetry is significant at 10% indicating it has effect on firm performance. However on regressing return on assets on other variables, results indicate that information asymmetry is significant at both 5% and 10% significant level. VL - 8 IS - 2 ER -
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