How are corporate disclosures related to the cost of capital? The fundamental role of information asymmetry

2016 ◽  
Vol 54 (7) ◽  
pp. 1669-1701 ◽  
Author(s):  
Beatriz Cuadrado-Ballesteros ◽  
Isabel-Maria Garcia-Sanchez ◽  
Jennifer Martinez Ferrero
Keyword(s):  
Information Asymmetry ◽  
Cost Of Capital ◽  
Agency Conflicts ◽  
Content Type ◽  
Mediator Role ◽  
International Setting ◽  
The Cost ◽  
Role Of Information ◽  
Corporate Disclosures

Purpose – The purpose of this paper is to analyze empirically the fundamental role that information asymmetry plays in the functioning of an efficient capital market as mediator in the relation between corporate disclosures and cost of capital. Design/methodology/approach – By using a sample of 1,260 international non-financial listed companies in the period 2007-2014. Findings – The findings suggest that high-quality financial and social disclosures quality reduce the cost of capital, by decreasing information asymmetry. In other words, the authors find evidence of the mediator role of information asymmetry in the relation between corporate disclosures and the cost of capital. These results are also controlled for differences on accounting standards and other institutional factors. Originality/value – The central assumption is that the demand for corporate disclosures that reduces the information advantages of some investors (who are more informed) arises from agency conflicts and these information differences in turn, determine the cost of capital. This paper is the first attempt to study, jointly, the effects of decreasing information asymmetries by corporate disclosures on the cost of capital in an international setting. In addition, the authors focussed on both financial and social disclosures, creating empirical proxies whose validity for the analysis has been evidenced.

Information asymmetry and equity issue decision of low-leverage firms

2018 ◽  
Vol 44 (11) ◽  
pp. 1330-1346
Author(s):  
Bipin Sony ◽  
Saumitra Bhaduri
Keyword(s):  
Information Asymmetry ◽  
Equity Issue ◽  
Content Type ◽  
Equity Issues ◽  
Developed Economies ◽  
Tangible Assets ◽  
Credit History ◽  
The Impact ◽  
Role Of Information

Purpose The purpose of this paper is to investigate the role of information asymmetry in the equity issue decision of two categories of Indian firms with distinct levels of information asymmetry – levered firms and unlevered firms. Design/methodology/approach This paper proposes a novel empirical approach to compare these two categories of firms. Levered firms exposed to the debt markets are under the scrutiny of lenders, reducing their information asymmetry problems. On the other hand, unlevered firms, which are smaller firms with fewer tangible assets and no credit history suffers more information problems. The authors use a propensity score matching method to identify firms that share similar firm-specific characteristics in these groups and compare equity issues to analyze the impact of information asymmetry. Findings The results show that information asymmetry plays a key role in the equity issue decision of Indian firms. Additionally, the authors find that the trends and characteristics of low-leverage (LL) firms in India are comparable to the LL from developed economies, which is consistent with the findings that they face more information problems. Originality/value Unlike the conventional approach of using proxy variables to capture information asymmetry, this study uses a novel framework where the authors compare the equity issue decision of similar firms in two categories with different degrees of information asymmetry.

scholarly journals Leverage and firm investment: the role of information asymmetry and growth

2019 ◽  
Vol 27 (1) ◽  
pp. 56-73 ◽  
Author(s):  
Albert Danso ◽  
Theophilus Lartey ◽  
Samuel Fosu ◽  
Samuel Owusu-Agyei ◽  
Moshfique Uddin
Keyword(s):  
Information Asymmetry ◽  
High Growth ◽  
Firm Investment ◽  
Financial Leverage ◽  
Content Type ◽  
Growth Firms ◽  
The Impact ◽  
The Relationship ◽  
Role Of Information

PurposeThis paper aims to demonstrate how financial leverage impacts firm investment and the extent to which this relationship is conditional on the level of information asymmetry as well as growth.Design/methodology/approachThe paper relies on data from 2,403 Indian firms during the period 1995-2014, generating a total of 19,544 firm-year observations. Analysis is conducted by using various panel econometric techniques.FindingsDrawing insights from agency theories, the paper uncovers that financial leverage is negatively and significantly related to firm investment. It is also observed that the impact of financial leverage on firm investment is significant for high information asymmetric firms. Finally, the paper shows that the relationship between leverage and firm investment is significant for low-growth firms. However, no significant relationship is found between leverage and investment for high-growth firms.Originality/valueThis paper provides fresh evidence on the leverage–investment nexus and, to the authors’ knowledge, it the first paper to examine the extent to which this leverage–investment relationship is driven by the level of information asymmetry.

Choice between rights issue and private placements of equity and the role of information asymmetry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bipin Sony ◽  
Saumitra Bhaduri
Keyword(s):  
Information Asymmetry ◽  
Private Equity ◽  
Emerging Market ◽  
Content Type ◽  
Private Placement ◽  
Private Placements ◽  
Rights Issue ◽  
The Impact ◽  
Role Of Information

PurposeThe objective of this paper is to investigate the role of information asymmetry in the equity selling mechanisms chosen by the firms from an important emerging market, India. Specifically, the authors look into the choice between the two most popular mechanisms of equity issues – rights issue and private placement of equity.Design/methodology/approachThis study introduces three analyst specific variables as proxies of information asymmetry as the conventional proxies are fraught with several disadvantages. First, the paper tests the choice between rights issue and private placement using a binary logistic model. In the second approach the authors use rights issue and segregate the private placements into preferential allotments and qualified institutional placements and test the impact of information asymmetry using a multinomial logistic regression.FindingsThe outcome of this empirical exercise shows that only those firms facing lesser information problems choose rights issue of equity. Private placements are chosen by firms facing higher information problems to circumvent information costs. The results remain invariant even after segregating the qualified institutional placements from private equity placement as the firms with information disadvantage choose to place equity privately.Originality/valueIn contrast to the conventional studies that focus on the debt-equity framework, the authors argue that the impact of information asymmetry is applicable even at disaggregated levels of equity selling mechanism.

The Role of Voluntary Disclosure on Information Asymmetry and Its Impact on the Cost of Capital

2017 ◽  
Vol 23 (9) ◽  
pp. 8389-8394
Author(s):  
Mustafa Yuosef Saa’deh ◽  
Nor Raihan Mohamad ◽  
Hafiza Aishah Hashim
Keyword(s):  
Information Asymmetry ◽  
Voluntary Disclosure ◽  
Cost Of Capital ◽  
The Cost

Implementasi Asas Keterbukaan pada Pengadaan Tanah bagi Pembangunan untuk Kepentingan Umum: Antara Harapan dan Kenyataan

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Priyo Katon Prasetyo ◽  
Rosye Villanova Christine ◽  
Sudibyanung Sudibyanung
Keyword(s):  
Information Asymmetry ◽  
Case Studies ◽  
Public Interest ◽  
Economic Inequality ◽  
Land Acquisition ◽  
The Public ◽  
Land Scarcity ◽  
Library Research ◽  
Role Of Information

Abstract: Based on Law Number 2 of 2012 concerning Land Acquisition for Development in the Public Interest, the Openness Principle is one of the ten principles as the basis of the implementation of development. This principle is significant because its complex role can lead to conflicts and disputes. In this paper, discussions are divided into two parts: 1) how the implementation is expected to be applied according to the acquisition procedure in theory; and 2) the reality that occurs in the field. The first discussion was conducted by reviewing the applicable regulations and the methods or concepts of development of the openness principle. Meanwhile, the second discussion about the reality on the field was conducted by elaborating case studies regarding problems in land acquisition. The results of this study indicate that there are gaps in the implementation of the openness principle between theory and reality in regards of land scarcity, economic inequality, and information asymmetry among the involved parties. In conclusion, the implementation of the openness principle is significant with the role of information in land acquisition.Intisari: Berdasarkan Undang Undang Nomor 2 Tahun 2012 tentang Pengadaan Tanah Bagi Pembangunan Untuk Kepentingan Umum, Asas Keterbukaan adalah salah satu dari sepuluh asas yang menjadi dasar pelaksanaannya. Asas ini menjadi signifikan karena perannya yang kompleks dapat menimbulkan konflik dan sengketa. Artikel ini akan membagi pembahasan menjadi dua bagian: pertama, bagaimana implementasi yang seharusnya diterapkan pada prosedur pengadaan secara harapan, dan kedua, membahas mengenai realita yang terjadi di lapangan. Secara harapan pembahasan dilakukan dengan melakukan library research atau studi terhadap peraturan yang berlaku dan metode-metode atau prinsip perkembangan dari asas keterbukaan. Realitas di lapangan akan dielaborasi dari studi kasus mengenai permasalahan dalam pengadaan tanah. Hasil dari penelitian ini menunjukkan ada gap dalam implementasi asas keterbukaan antara harapan dan realitas di lapangan yang bersumber dari kelangkaan sumber daya/tanah, ketimpangan ekonomi dan asimetri informasi di antara para pihak yang terlibat. Tulisan ini menyimpulkan bahwa implementasi asas keterbukaan signifikan dengan peran informasi dalam pengadaan tanah. 

The financial consequences of human capital disclosure as part of integrated reporting

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antonio Salvi ◽  
Nicola Raimo ◽  
Felice Petruzzella ◽  
Filippo Vitolla
Keyword(s):  
Human Capital ◽  
Firm Value ◽  
Fixed Effects ◽  
Cost Of Capital ◽  
Positive Impact ◽  
Firm Risk ◽  
Integrated Reporting ◽  
Content Type ◽  
Financial Consequences ◽  
The Cost

PurposeThe purpose of this paper is to analyse the financial consequences of the level of human capital (HC) information disclosed by firms through integrated reports. Specifically, this work examines the effect of HC information on the cost of capital and firm value.Design/methodology/approachA manual content analysis is used to measure the level of HC information contained in integrated reports. A fixed-effects regression model is used to analyse 375 observations (a balanced panel of 125 firms for the period 2017–2019) and test the financial consequences of HC disclosure.FindingsThe empirical outcomes indicate that HC disclosure has a significant and negative effect on the cost of capital and a positive impact on firm value. Our results show that companies can reduce investors' perceived firm risk by improving HC disclosure, leading to a lower cost of capital. Moreover, our findings support the notion that increased levels of HC disclosure are linked to firms' improved access to external financial resources, consequently enhancing firm value.Originality/valueThis study is the first contribution to examine the financial consequences of HC disclosure and is one of the first to examine the level of HC information within integrated reports.

Understanding destination evangelism: a social media viewpoint

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Purvendu Sharma
Keyword(s):  
Social Media ◽  
Information Seeking ◽  
Structural Equation ◽  
Structural Equation Models ◽  
Critical Role ◽  
Content Type ◽  
Mediating Role ◽  
Information Seeking Behaviors ◽  
Role Of Information

PurposeThe present research aims to introduce and understand the promising nature of destination evangelism in the context of social media-based tourism communities (SMTCs). Further, factors that influence evangelism and information-seeking behaviors on SMTCs are examined.Design/methodology/approachA conceptual model is developed that features an interplay of destination distinctiveness, destination evangelism, travel commitment and information-seeking engagement. Data were collected from 215 active users of SMTCs and analyzed using structural equation models.FindingsThe research findings indicate that destination distinctiveness and information-seeking positively lead to destination evangelism. Information-seeking is found to mediate the relationship between (1) destination evangelism and travel commitment and (2) destination evangelism and distinctiveness.Research limitations/implicationsThe research offers meaningful insights into exploring constituents of destination evangelism. The research also understands and highlights the critical role of information-seeking engagement about distinct destinations.Practical implicationsThis research highlights key areas to build, improve and inspire destination evangelism on SMTCs.Originality/valueThis study offers a fresh contribution to tourism literature by investigating destination evangelism and its drivers. This is explained by closely uniting vital research streams of evangelism, tourism and engagement. It further highlights the dual mediating role of information seeking, suggesting that these engagements are critical to evangelizing destinations.

Islamic banking and corporate investment efficiency: empirical evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Empirical Model ◽  
Generalized Method Of Moments ◽  
Corporate Investment ◽  
Investment Efficiency ◽  
Islamic Banks ◽  
Agency Conflicts ◽  
Content Type ◽  
Listed Firms ◽  
Lower Effect

PurposeThe purpose of this paper is to examine whether and how Islamic banks' financing affects corporate investment efficiency.Design/methodology/approachTo achieve the research purpose, an empirical model was constructed to describe the relationship between Islamic banks' financing and corporate investment efficiency. The empirical model was tested through generalized method of moments (GMM) estimation technique using a panel data of 163 Malaysian listed firms for the period 2007–2017.FindingsThis study provides evidence that Islamic banks' financing plays an important role in enhancing investment efficiency and that this positive effect comes mainly from non-PLS contracts. Moreover, the results show that the effect of Islamic banks' financing in preventing suboptimal investments is stronger in the financial crisis period. The results also reveal that the contribution of Islamic banks' financing in reducing suboptimal investments is more prominent when firms face over-investment problems.Research limitations/implicationsThis research contributes to the debate on the financial implications of Islamic banks' financing modes by exploring their effect on corporate investment efficiency.Practical implicationsFrom a managerial perspective, the research findings are beneficial to Islamic bank managers to the extent that they highlight the role of Islamic financial contracts in improving corporate investment efficiency. In addition, the lower effect of PLS contracts on investment efficiency implies that policymakers in Malaysia should multiply their efforts to further expand the PLS financing.Originality/valueThis paper offers some insights on the role of Islamic banks' financing in mitigating agency conflicts and reducing asymmetric information problems. It is the first attempt focusing on the role of Islamic financing in fostering corporate investment decisions.

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