The Association of Cost of Capital and Earnings Management Under Information Asymmetry

2017 ◽  
Vol 35 (1) ◽  
pp. 121-154
Author(s):  
Mi Ryung Chang ◽  
Byung Chul Lee
Keyword(s):  
Earnings Management ◽  
Information Asymmetry ◽  
Cost Of Capital

scholarly journals IPO’s Long-Run Performance: Hot Market versus Earnings Management

2021 ◽  
Vol 14 (3) ◽  
pp. 132
Author(s):  
Tsai-Yin Lin ◽  
Jerry Yu ◽  
Chia-Yi Lin
Keyword(s):  
Earnings Management ◽  
Information Asymmetry ◽  
Explanatory Power ◽  
Market Condition ◽  
Relative Importance ◽  
Long Run ◽  
Hot Market

One of the IPO-related anomalies that have been well-discussed in the finance literature is the IPO’s long-running underperformance. Two of the major explanations of that phenomenon are: “Hot market” and earnings management. This study investigates the relative importance of these two explanations to the IPO’s long-run underperformance. Our results show that although both hot market and earnings management play a role in explaining IPO’s long-run performance in their own rights, earnings management no longer exhibits significant explanatory power when the IPOs are issued in the cold market. While the IPOs that are issued in the hot market still tend to underperform in the long run even if the firms do not engage in earnings management. Our findings are consistent with the literature related to the information asymmetry in IPO market. And, because the information asymmetry is more severe in hot market condition, IPOs issued in hot market tend to exhibit poorer returns than those issued in cold market.

scholarly journals Relationship between information asymmetry and cost of capital

2013 ◽  
Vol 4 (1) ◽  
pp. 321-328 ◽  
Author(s):  
Hosein Kazemi ◽  
Fateme Rahmani
Keyword(s):  
Information Asymmetry ◽  
Cost Of Capital

scholarly journals Information asymmetry, mutual funds and earnings management: Evidence from China

2013 ◽  
Vol 6 (3) ◽  
pp. 187-209 ◽  
Author(s):  
Yunhao Dai ◽  
Dongmin Kong ◽  
Li Wang
Keyword(s):  
Earnings Management ◽  
Information Asymmetry ◽  
Mutual Funds

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.

scholarly journals A comparison of earnings management between domestic and cross-border mergers.

2010 ◽  
Vol 7 (4) ◽  
pp. 19-33
Author(s):  
Amy Yueh-Fang Ho
Keyword(s):  
Asymmetric Information ◽  
Mergers And Acquisitions ◽  
Earnings Management ◽  
Information Asymmetry ◽  
Discretionary Accruals ◽  
Informational Asymmetry ◽  
Empirical Results ◽  
Cross Border ◽  
Acquiring Firms ◽  
International Mergers

This study examines how U.S. acquiring firms managed their earnings by means of discretionary accruals prior to the announcement of stock-for-stock domestic and cross-border mergers during the period 1980 to 2002. The objective of this study is to determine whether earnings management is exacerbated in cross-border mergers according to the informational asymmetry hypothesis. The results show that that acquiring firms tend to manage earnings upward prior to stock swap domestic takeovers. In addition, the results reveal some evidence of earnings management prior to stock swap cross-border takeovers. However, the empirical results exhibit no significant distinction in earnings management between the domestic and cross-border mergers. Despite the possible existence of asymmetric information associated with cross-border takeover activities, the international mergers and acquisitions do not facilitate managers to engage in more aggressive earnings management. The findings suggest that the higher degree of information asymmetry in cross-border mergers does not contribute to a higher degree of earnings management.

Sign in / Sign up

Export Citation Format

Share Document