Information Asymmetry Research Articles

Who promotes firm innovation more: outside or inside political successor?

ABSTRACT Whereas researchers have demonstrated the relevance of politician turnover for firm innovation, the role of successor origin has remained elusive. This paper compares internally and externally appointed political successors and investigates which types of succession foster more firm innovation. Using a sample of manufacturing firms experiencing political succession events between 2005 and 2010 in China, we find that firms experiencing outside political succession conduct fewer R&D activities than those undergoing inside political succession. Furthermore, we find that factors aggregating information asymmetry (i.e. abnormal departure of the predecessor) augment the above negative relationship, while those weakening information asymmetry (i.e. successor-related information) alleviate it. Our findings support the information asymmetry theory’s prediction that outside succession introduces greater information asymmetry regarding the consistency of the political environment than inside succession, thus decreasing firm innovation. This study contributes to the politician turnover literature by highlighting the influence of successor origin on firm innovation.

Evolutionary game analysis of violation regulation in the electricity market based on blockchain technology

Electricity market violations affect the overall operations of the electricity market. This paper explores the evolutionary stability strategies of electricity generation enterprises and electricity consumers under two modes: traditional regulation and blockchain regulation to analyze blockchain technology’s mechanism and conditions in solving electricity market violations. The experimental results indicate that the likelihood of consumers accepting electricity and the regulatory capacity of regulatory agencies play a crucial role in determining the violation approach adopted by electricity generation enterprises. Under traditional regulatory models, due to information asymmetry, regulatory agencies may not be able to detect violations promptly. Meanwhile, electricity consumers may choose to accept violations by power generation companies due to high appeal costs. Blockchain technology enables regulatory agencies to improve their regulatory capabilities by eliminating information asymmetry, reducing the cost of complaints from electricity consumers, thereby elevating the risk for enterprises engaging in market violations and optimizing the evolutionary game towards an optimum state.

Information Asymmetry and Firm-level Cash Holdings During COVID-19 Pandemic PeriodAn Analysis Based on Chinese Listed Companies

Information Asymmetry and Firm-level Cash Holdings During COVID-19 Pandemic PeriodAn Analysis Based on Chinese Listed Companies

Dividend policy under mandatory ESG reporting

Governments and stock exchanges worldwide are increasingly mandating firms to disclose their environmental, social, and governance (ESG) performance. This study examines whether firms adjust their dividend policies following the implementation of mandated ESG reporting. Leveraging the staggered adoption of mandatory ESG reporting using a large international dataset spanning from 1996 to 2019, we find a substantial and negative impact on corporate dividends. Specifically, we observe that firms subject to mandatory ESG reporting, on average, reduce their dividend payout ratios by approximately 25% immediately after its implementation. Further analysis reveals that this response is more pronounced for firms facing higher agency conflicts and operating in environments with greater information asymmetry, as these firms are more difficult to monitor. Additionally, we find that the impact is stronger for firms located in countries with less developed stock markets and higher financial constraints. Exploiting cross-country variations in the regulatory framework of ESG reporting, we find a heightened response in jurisdictions with stricter disclosure requirements.

Gender Diversity: An Empirical Study on 4.151 US Investment Funds

The aim of this paper is to explore the issue of gender diversity (GD) in relation to the world of investment funds. In recent times, in fact, savers’ choice does not only converge on the mere pursuit of profit. Investment funds, in this scenario, are increasingly judged according to their environmental and ethical actions, and not just by the promised rewards. Individual and institutional investors, on this wake, are aligning their behavior with their values by taking responsibility for the investments they select. It is central, therefore, to understand and observe how issues such as GD are evaluated, managed and converted into rating values by funds. This paper is supported by a mixed research methodology involving, on the one hand, an in-depth literature review on the aforementioned topic and, on the other hand, a statistical study developed with the “R-Studio” program. Through the statistical derivation, this study proposes an analysis of histograms and scatter plots on a sample of 4.151 investment funds and the GD-related rating judgments compared with their net assets and longevity. Based on our findings, funds with higher net assets achieve high rating classes but not excellence. In fact, larger funds reside in lower rating classes. Similarly, it is also valid for the amount of capital managed by the funds. From the empirical evidence we provide, it can also be seen that, there is no evidence between GD rating category and youngest funds longevity. Filling a gap that exists in the literature on GD-related rating assessment in investment funds, the originality of this paper concerns the descriptive statistics proposed. In fact, the paper contributes to the literature on GD by enriching the analysis of the factors surveyed for its measurement and rating judgment. This study may have both theoretical and practical implications. From a practical perspective, the statistical evidence in this paper could be a guideline for practitioners oriented toward ethical and profitable investment choices. From a theoretical point of view, instead, GD evaluation and monitoring could be a tool to reduce problems related to transparency and legitimacy theory, mitigating information asymmetry between parties and aligning them on potential risks.

Do the relationship paths between capital structure and investment efficiency depend on information asymmetry? A comparison between emerging and developed countries

ABSTRACT This paper aims to analyze the moderating role of debt maturity and the mediating role of information asymmetry in the relationship between financial leverage and investment efficiency and to compare the results between firms domiciled in emerging and those headquartered in developed countries. Using two proxies for investment efficiency, the results showed that debt maturity moderates the association between financial leverage and investment efficiency at both levels of developed and emerging countries. This paper also confirmed that information asymmetry carries the influence of financial leverage to investment efficiency only for those enterprises headquartered in emerging countries.

Blockchain-driven framework for construction waste recycling and reuse

Conventional management mechanisms for construction waste recycling and reuse (CWRR) often cause considerable information asymmetry, inadequate government supervision, and imperfect incentive mechanisms, resulting in frequent illegal dumping and landfilling of construction waste and relatively low recycling rates. To address these issues, we introduce blockchain technology to CWRR. The design science research methodology was adopted to identify the main steps in functional requirement identification and blockchain framework development for CWRR. To explain how blockchain can improve the CWRR process, a conceptual model for the functional requirements of the proposed framework was constructed using qualitative analysis. A blockchain-driven framework was developed to overcome practical barriers in the CWRR industry. Based on scenario simulation results, the proposed framework had execution and transaction costs of $4.735 and $1.276, respectively, and latency performance at the millisecond level. The results indicate that (1) based on specific problems systematically identified from CWRR practices, the proposed framework can address practical barriers in the CWRR industry more directly; (2) the CWRR industry can use blockchain technology to achieve information sharing, comprehensive government supervision, and effective incentive mechanisms and (3) the blockchain-driven framework has high efficacy and can promote efficient CWRR and high-quality development of CWRR industry chain. This management model is conducive to forming a collaborative CWRR industry chain that can lead to broader adoption of blockchain technology across industries.

Do European fintech benefit from bank-affiliated VCs?

In the current study, we scrutinize the efficacy of bank-affiliated venture capital (BVC) in augmenting the performance of European FinTech firms, with a specific sample size of 105 firms. The investigation is anchored in a resource-based view (RBV) and examines the strategic comportment of banks vis-à-vis FinTech enterprises. Utilizing a dataset that encompasses pre-Brexit European FinTech firms from 2006 to 2019, we implement logistic regression models for our primary analysis. Propensity score matching is invoked to mitigate selection bias, and machine learning techniques are applied to address data imbalance. The empirical evidence demonstrates that FinTech firms backed by BVC exhibit superior profitability and asset performance compared to their non-BVC-backed counterparts. The robustness of these findings persists even after accounting for selection bias and data imbalance. The study posits that bank-affiliated venture capital serves as a pivotal criterion for FinTech entrepreneurs in investor selection, thereby enriching the scholarly discourse on the symbiotic relationship between traditional banking institutions and emergent financial technologies within a European context characterized by information asymmetry and resource-based complementarities.

Allocating Inventory Risk in Retail Supply Chains: Risk Aversion, Information Asymmetry, and Outside Opportunity

Allocating Inventory Risk in Retail Supply Chains: Risk Aversion, Information Asymmetry, and Outside Opportunity

Design Tensions in Online Freelancing Platforms: Using Speculative Participatory Design to Support Freelancers' Relationships with Clients

This paper explores the design challenges that arise in supporting online freelancers to navigate relationships with clients. Prior studies have shown that current platform designs can lead to worker precarity in freelancer-client relationships, such as power imbalances, information asymmetry, and labor abuse. To envision alternative designs that empower workers in managing their relationships with clients, we engaged 22 Upwork freelancers in participatory speculative design activities. Through this co-design process, we identified design tensions that constrain design options as a result of conflicting values and priorities that could only be balanced and compromised rather than completely resolved. Six design tensions were identified in the context of designing for four different phases of freelancing. We observed three patterns in these tensions: 1) the freelancers' need for client involvement in their tasks and career growth, which conflicted with their skepticism that clients had sufficient incentives to be involved; 2) that there was often no viable balancing option for some tensions, but they could be addressed through changes in the platform's incentive structure; and 3) some tensions occurred not only between freelancers and clients, but also within the freelancer community. We present three approaches for addressing these design tensions and discuss how this research can support more equitable and healthy freelancer-client relationships.

Testing the Weak Efficient Market Hypothesis of Chinese Stock Market--Based on the Market Performance of Representative Stock Investment Portfolios in the HS300 Index

Chinas domestic stock market has developed very quickly overall in the more than 30 years since it was established, but information effectiveness in the Chinese stock market still faces multiple problems, so testing the weak efficient market hypothesis of the Chinese stock market is a good way to test its information quality and give investors relevant advice. This article selected representative stocks from the HS300 index, gathered the stocks historical data, used the index model to construct an optimal portfolio, and used another part of historical data to test if the portfolio has continuous excess return compared with the market portfolio and risk-free asset. The article finds excess return for the optimal portfolio during a long period and cannot prove that the Chinese stock market is weak and efficient. This result will provide a certain theoretical basis for investors who use technical analysis for stock investment and may also indicate that many issues still need to be addressed in the Chinese stock market, such as information asymmetry, high transaction costs, and insufficient regulation.

A Game Model Analysis of the International Digital Service Tax in an Asymmetric Market Duopoly

Against the backdrop of the rapidly expanding digital economy, multinational corporations are increasingly exploiting information asymmetry in the market to employ covert and diverse methods of tax avoidance. This poses a significant challenge to tax collection and administration. The proposal of a digital service tax aims to adapt the international tax system to the digitalization of the economy, ensuring fair and reasonable tax payments. To address these challenges, this article assumes an asymmetric international digital economy market and a domestic market characterized by duopoly. It establishes an asymmetric market duopoly game, calculates the digital gains of each country's market using the logistic function, determines the Nash equilibrium of the data service tax game, and analyzes the relationship between the digital service tax rates of strong and weak countries in the digital economy.

Does employee ownership improve labour investment efficiency? Evidence from European firms

This paper studies the impact of non-executive employee ownership on labour investment efficiency for a sample of European firms. It empirically documents a negative association between employee ownership and labour investment inefficiency, which serves an inverse measure of labour investment efficiency. This negative association is notably more pronounced for firms reporting higher discretionary accruals in their financial statements (i.e. firms with higher information asymmetry) and for those with a lower percentage of independent directors (i.e. firms with greater agency problems). As such, this paper offers evidence that employee shareholding enhances employment decisions through two channels: reduced information asymmetry and improved management monitoring.

Understanding the Efficiency Levels among Cryptocurrencies: Islamic, Green and Traditional

Background: Islamic cryptocurrencies are different from conventional ones in that they are backed by physical assets and are based on religious principles. After the COVID-19 pandemic, cryptocurrencies showed different behavior. However, there are not many studies on the efficiency, in its weak form, of these three typical families of cryptocurrencies (Islamic, green, and traditional). Purpose: This study compares the efficiency levels of Islamic cryptocurrencies (HelloGold), green cryptocurrencies (Cardano, NANO, Stellar, IOTA), and traditional cryptocurrencies (BTC and ETH) in the preceding period and during the geopolitical conflict between Russia and Ukraine in 2022. Methods: This research will use Lo and Mackinlay's (1988) variance ratio methodology, and the Detrended Fluctuation Analysis (DFA) model will be used. Results: The results indicate that the Islamic currency HGT and the green currency XNO display significant information asymmetries, rejecting the random walk hypothesis for various time intervals. Similarly, other green currencies such as XLM, ADA, and MIOTA, as well as ETH and BTC, reject the hypothesis to varying degrees and time intervals. Furthermore, the Islamic cryptocurrency (HelloGold) was anti-persistent before and during the conflict. The digital currencies ADA and BTC are persistent in both periods. ETH is in equilibrium in the pre-conflict period and becomes persistent during the conflict (0.50 - 0.56), while MIOTA and XLM are persistent during the pre-conflict period and shift to equilibrium during the Russian invasion of Ukraine in 2022. Finally, the XNO eco-currency shows the same anti-persistence characteristics during the two sub-periods. Conclusion: These results highlight the complexity and dynamics of cryptocurrency markets, indicating that different digital currencies can exhibit different temporal behaviors regarding information efficiency and persistence or anti-persistence patterns.

The impact of tax digitalization on corporate salary structures

Against the backdrop of rapid development in tax digitalization, exploring its impact on corporate salary structures has emerged as a significant topic in the realms of China's economy and business management. This study, set against the Phase III Golden Tax Project, utilizes data from Chinese listed companies between 2009 and 2021 to examine the effects of tax digitalization on corporate salary structures, particularly on the pay gap between executives and regular employees. The findings reveal that tax digitalization has narrowed this pay disparity. These results were further validated through robustness tests. Mechanism tests indicate that this effect is primarily achieved through improving information asymmetry and reducing agency costs. Moreover, the study discovers that tax digitalization has a heterogeneous impact on the pay gap across companies of different sizes and ownership types. Finally, the paper proposes policy recommendations based on these findings.

Does voluntary environmental, social, and governance disclosure impact initial public offer withdrawal risk?

AbstractDespite much research now being published on Environmental, Social, and Governance (ESG) investments and Initial Public Offerings (IPOs) withdrawal risk, there appears to be a lack of evidence on the prospective IPO withdrawal risk associated with voluntary disclosure of ESG policies. This paper investigates the influence of ESG disclosure on IPO withdrawal by comparing voluntary ESG disclosure to conventional IPOs in the international market. A large data set is employed here, containing 33,535 failed and successful IPOs from 1995 to 2019 from several nations with their own legal systems, cultural norms, and economic systems. The findings reveal that voluntary disclosure of ESG practices does significantly reduce the likelihood of an IPO withdrawal, by as much as 48%. These findings strongly suggest that organizations engaged in ESG activities perceive voluntary disclosure as an incentive, to adhere to social expectations. Consequently, reducing the asymmetry of information between IPO participants minimizes the withdrawal risk these companies face, hence diminishing doubts about their legitimacy. The results have consequences for IPO businesses, investors, researchers, and regulators.

Adoption of Blockchain Technology for Data Management of Human Resource Demands in Organizational Enterprises

Human resource data accuracy has become a significant factor in assessing the effectiveness and performance of human resource management (HRM) in businesses. Numerous human resource hazards originating from asymmetric information continue to cost firms money and even put companies out of business despite the rapid progress of mobile technology and Internet technology. Blockchain is a transaction platform that makes use of the immutability qualities of immutable data records. Because of the dispersed nature of this technology, it has a broad variety of applications in numerous industries. Seeing the potential of this new technology, we picked the HRM sector since this data must be kept private and secret while still having great research value. This research presents a unique blockchain-based encryption method for establishing an HRM data method that decreases the danger of HRM data integrity. The data is authenticated using smart contracts, and data is encrypted using the proposed Improved Identity-based blowfish encryption algorithm (IIBEA) with Particle Swarm Optimization (PSO). New blocks are verified using the Proof of Work (PoW) consensus process. The suggested model's metrics are examined and compared to traditional encryption approaches. This model solves the lack of difference in the authenticity of HRM information, and it will give real and effective information to the HRM of organizational companies.

Financial technology and firm productivity: Evidence from Chinese listed enterprises

Recent data show that the number of fintech investment deals is increasing, implying that fintech is gradually penetrating various industries and may have far-reaching impacts on industrial production and operations. This paper studies the impact of fintech on firm productivity and the mediating effects of financing constraints, information asymmetry and technological innovation. This paper collects data from 1662 samples of Chinese listed firms from 2011 to 2022 and screens the number of firms that meet the fintech criteria to construct the regional fintech development level. Our analysis shows that fintech has a positive effect on enhancing firm productivity. Path analysis reveals that digital transformation indirectly enhances firm productivity by reducing information asymmetry, easing financing constraints, and improving technological innovation. Our research introduces innovative approaches for developing indicators in financial technology. The insights generated from this study hold potential value for both entrepreneurs and governmental bodies.

Readability and banks’ risk-taking behavior: Evidence from GCC

We investigate the relationship between annual reports’ text readability and bank risk-taking in the Gulf Cooperation Council (GCC) countries. We find that easy-to-read annual reports are associated with a higher probability of banks’ insolvency. This finding suggests that banks with higher risks have a greater incentive to reduce information asymmetry, resulting in easy-to-read annual reports to gain the trust of the banks’ investors. The result is also attributable to the fact that GCC banks have a tight culture and formal procedures that bank managers rely upon to manage uncomfortable circumstances like risk-taking behavior. Our study findings also suggest that the traditional dynamics of market discipline theory do not effectively operate within the GCC banking environment. This might be attributed to the inadequate governance frameworks established for these financial institutions.

Impact of attention on rare events across industries in Indonesia

Rare events (RE) are substantial with significant impact but are difficult to predict, often deviating from regular expectations. These events trigger psychological reactions in the market and susceptible to irrational decisions that challenge logical assumptions. The rapidity of the crisis has led to highly volatile market conditions, fostering instances of asymmetric information. Therefore, this study aimed to explore the impact of attention on market dynamics by examining diverse possibilities over time. The article focused on all publicly listed industries on the Indonesian Stock Exchange (IDX/BEI). Using time series regression data from 1997 to 2020, the article comprised 5,615 observations across nine sectors. The primary model was based on three factors originating from the Fama-French and prospect theory, with attention serving as the main risk element to assess the impact of attention on abnormal returns (AR) during RE. The results disclosed that various events showed diverse effects on attention behavior, varying across all sectors. Additionally, moderation analysis showed a correlation between attention and AR. The results signified that RE mitigates the negative relationship between attention and AR. The adverse impact of attention on AR diminishes during RE. These results contributed to the literature by providing insights into the excessive attention to specific information disrupts market mechanisms, triggers disproportionate emotional responses, and alters investor preferences. Furthermore, this study established that events prompting excessive attention have varying effects on attention behavior across all sectors.