A critical review of information asymmetry in the business cycle: How digital ledger technology can transform and sustain the business cycle

Abstract

Distributed ledger technology (DLT) is a disruptive technology with the potential to reengineer the entire trading cycle by alleviating inefficiencies such as time lags, multiple record keeping, human errors, and transparency common with the traditional trade cycle. This study evaluates the potential benefits of DLT in mitigating information asymmetry in trading relationships and how a DLT model can be deployed to revamp the trading process. We find that information friction results from differences in stakeholder preferences by identifying and categorizing information friction into 4 groups through a review of key studies in leading management journals. This finding aligns with conclusions reached in scientific research that the benefits of DLT prevail in markets with imperfect information. In addition, we illustrate the potential benefits of DLT in mitigating inefficiencies in trading relationships resulting from information asymmetry. The article concludes with a word of caution for potential users to take gradual steps of adoption to keep pace with changing technology so as not to become laggards.