Information Asymmetry Research Articles

Culture, international stakeholders, and crowdfunding

AbstractResearch SummaryInternational crowdfunding platforms present a unique opportunity for foreign entrepreneurs to attract stakeholders, typically from either the entrepreneur's home‐country or the platform's host‐country. We argue that success in mobilizing these stakeholders is culturally dependent. Specifically, cultural distance from the platform's host country can impede the mobilizing of home‐country stakeholders. Conversely, while attracting host‐country stakeholders may appear advantageous, these benefits are uncertain and limited for culturally‐proximal entrepreneurs. This is because their offerings are seen as less distinct compared to host‐country local offerings while introducing additional information asymmetries. Given these dynamics, we theorize that culturally‐distant entrepreneurs have better fundraising prospects when attracting host‐country backers, while culturally‐proximal entrepreneurs are more successful when mobilizing home‐country backers. Our analysis of 55,266 foreign projects on Kickstarter supports these arguments.Managerial SummaryThis study examines how cultural differences affect the success of entrepreneurs using non‐local crowdfunding platforms. We find that entrepreneurs from countries that are culturally distant from the platform's host‐country are more successful when they focus on attracting backers from the platform's host‐country. In contrast, entrepreneurs from culturally similar countries do better when they mobilize supporters from their home country. For practitioners, this means that understanding cultural distance is key to successful crowdfunding. Entrepreneurs should tailor their outreach strategy based on their cultural distance from the platform's host country. Those from culturally‐distant regions should prioritize backers from the platform's country, while those from culturally similar regions should focus on home‐country supporters to maximize their fundraising success.

The Information content of annual report and cost of equity capital: Based on Text Vectorization Method

Taking Chinese A-share listed companies in Shanghai and Shenzhen from 2017 to 2021 as the research sample, the method of text vectorization is used to construct an index of information content of annual report, and empirically test the impact of information content on the cost of equity capital. The results show that the information content is negatively related to the cost of equity capital, and the degree of information asymmetry plays a mediating role between them. This article is the first to verify the effect of information content on the cost of equity capital, and it is expected to provide theoretical guidance for regulators, enterprises and investors.

Budget participation and financial information asymmetry: Behavior of budget users and financial report fraud

Financial statement fraud is a problem often faced by organizations that can reduce their performance. An organization that successfully achieves its goals must be aware of information asymmetry and the need for moral justice in managing its finances. The research population comprises employees of the finance, planning, reporting, and budget preparation sections of the Gowa Regency regional performance unit. This research selected a saturated sample of 76 employees from the total population. The results show that participatory budgeting has a significant effect on financial report fraud and that information asymmetry has a substantial influence on financial statement fraud. The research results show that moral justice moderates the effect of participatory budgeting on financial report fraud. Moral justice cannot moderate the influence of information asymmetry on financial statement fraud. Employees must still have good moral justice in participatory budgeting to minimize the possibility of fraudulent financial reports. It is hoped that the findings of this research will enable organizations to create innovative information facilities to reduce information asymmetry so that organizational performance can be achieved.

Combining Human and AI Strengths in Object Counting under Information Asymmetry

With the recent development of artificial intelligence (AI), hybrid human-AI teams have gained more attention and have been employed to solve all kinds of problems. However, existing research tends to focus on the setting where the same task is given to humans and AI. This work investigates a scenario where different agents have access to different types of information regarding the same underlying problem. We propose a probabilistic framework that combines the predictions of humans and AI based on the quality of the information given by both agents. We apply this framework to a regression task in which humans and AI are given different views of a jar and aim to estimate the number of objects in it. We demonstrate that our model can outperform methods that ignore information asymmetry. Furthermore, we show that complementarity can be achieved, i.e., combining human and AI predictions leads to better performance than relying on humans or AI alone. This framework can be adapted to solve other problems in which different sources of information from multiple agents are present.

Information Asymmetry Effect on Stock Liquidity Effect on Dividend Payout in Market Microstructure in Indonesia

The impact of market microstructure in shaping corporate governance has been distinguished in several previous research. Market Microstructure becomes prominent factor in emerging markets. This study tested the effect of market microstructure, in the scheme of stock liquidity, on dividend payouts. This study has set focus mainly on the impact of stock liquidity on the corporate payout policy. Later, the researcher examined the interaction given to the stock liquidity factor with information transparency and agency problem properties since the researcher believed that transparency is linked to the and, subsequently, affecting the corporate agents. This research examined observations using quantitative research method, Tobit regression on 256 non-financial firms of the Indonesian capital market during 2010-2018. Stock liquidity significantly impacted dividend policy. The result showed robustness with other stock liquidity measures. This study found that information asymmetry and agency problems had a moderation effect on stock liquidity effect on dividend payout. However, the interaction of stock liquidity and disparity of control rights and cash flow rights did not give a moderation effect on the dividend payout policy. The result supports the notion that dividend payout is an outcome of firm good governance and an inverse of dividend signaling theory.

Does the disclosure of ESG information by private equity firms impact the success of their fundraising efforts?

This study examines the impact of private equity fund managers' (GPs') ESG disclosure on fundraising. To this end, a sample of global private equity and venture capital funds that completed fundraising between 2020 and 2022 is employed. Our findings indicate that an increase in ESG disclosure by GPs is associated with an increase in fundraising. This indicates that GPs' ESG disclosure diminishes information asymmetry and has a favorable impact on fundraising. Conversely, the level of ESG disclosure among limited partners (LPs) has no significant impact on the relationship between GPs' ESG disclosure level and fundraising. The findings of this study have significant implications for private equity stakeholders, including GPs, given the current context of declining investment demand due to rising interest rates, recessionary concerns, poor performance and tighter regulations on private equity management. In this environment, ESG disclosure is becoming increasingly challenging for private equity firms to utilize as a fundraising strategy.

Analyzing supply-side moral hazard behaviors in Botswana's health care market: A qualitative study

This paper aims to analyse the behaviours and practices of health care service providers that constitute supply-side abuse of the medical health insurance schemes premised on the notion that patients visit doctors precisely to learn what amount and type of care is medically necessary. Using qualitative methods, individual in-depth interviews were carried on private health service practitioners and thematic analysis via SPSS. The study identifies systemic abuses like overcharging, billing for services not provided, and over prescription. Implication of these findings show that Fee-for-Service Payment Models incentivize providers to deliver more services, leading to potential over-utilization and increased costs in Botswana’s healthcare; due to information asymmetry providers may prioritize quantity over quality of care exploiting patients’ lack of knowledge to recommend unnecessary tests or treatments to maximize on revenue but also costs. On how to minimize supply side moral hazards, the propositions is for pursuance of cost containment strategies to ensure the smooth operation of the schemes like price listings, educate beneficiaries on cost implications and sustainability threats. These propositions can be instituted through an industry led bench-marking, on nationally through regulatory frameworks since moral hazards are an economic cost as inefficiencies brings mis-allocation of resources to enhance the sustainability of medical aid-based health care provisioning.

Analyzing the Impact of Credit Ratings on the Mode of Financing Employed by Indian Acquiring Companies

This study examines the relationship between four different credit rating variables, namely the presence of credit ratings, the longevity of credit ratings, the division of credit ratings in the speculative vs investment grade category and the levels of credit ratings on the mode of payment employed by the Indian acquiring companies. Further, the impact of all these rating variables is analyzed on the preference for the mode of funding by group-affiliated acquiring companies. The results imply that the mode of payment is influenced by only two rating variables, namely the longevity of credit ratings and the levels of credit ratings. The reason is that both these variables hedge the information gap on the part of the external funds’ providers, specifically the lenders, regarding the creditworthiness of the acquiring companies and enable them to lend money to these companies comfortably. This, in turn, increases the likelihood of such companies funding their acquisitions with cash. The results remain the same for the group-affiliated acquiring companies and are consistent with the information asymmetry theory. The study contributes to the existing literature by extending the findings on the association between the mode of payment in mergers and acquisitions (M&As) and credit ratings to an emerging market like India. The findings of the study can be generalized to other emerging economies where group affiliation and ownership concentration are prevalent.

FinTech business models focus on financing SMEs

ABSTRACT Small and medium-sized enterprises (SMEs) are economically important but are caught in a financing dilemma. Reasons for these financing problems are, among others, information asymmetries. Financial technologies (FinTech), in an intermediary role, could help to solve these information asymmetry problems and in this way solve the financing problems of SMEs. Therefore, FinTech as intermediaries for financing SMEs must develop a unique and enduring business model. Due to less empirical data, we will deductively show some first steps on the way to business model generation for FinTech as a practical guide. We are searching for similarities in the market development of creditworthiness assessment for SMEs, done by FinTech, as we saw it in the past for rating agencies concerning large companies. In particular, we analyze the business model of FinTech in the role of an intermediary in SME financing, with focus on customers, value propositions, key resources, and key activities. Our article contributes a first step in a conceptual but practical outline of business model generation for the ecosystem of FinTech in an intermediary role in solving debt financing restrictions of SMEs. In this overview article, we derive our results from a theoretical point of view but try to contribute meaningful and practical knowledge for all stakeholders in the SME financing system.

Exploring the Effects of the Information Asymmetry on the Card-Debt Crisis

The article aimed to explore the effects of the information asymmetry on the card-debt crisis in Taiwan’s credit card market. The card-debt crisis of the credit cards broke out in Taiwan in 2005. To improve this situation, the financial authorities were forced to intervene in the market. The article employed the documents analysis and collected the related literature and statistical data to construct the information asymmetry model and the proposed hypotheses of the adverse selections and the moral hazards. The results concluded that the card-debt crisis did stem from the information asymmetry, and was alleviated by the intervention of the financial authorities.

Improving the deferred acceptance algorithm for efficient sponsor-recipient matching

As the gap between rich and poor in China has become increasingly prominent, various charity platforms have emerged. However, due to information asymmetry, many recipients cannot receive effective donations, and the emergence of fraudulent donations also makes donors unable to fulfill their intentions. We designed some improvements to the delayed acceptance (DA) algorithm and applied it flexibly in the donation platform. This can improve the efficiency of matching between donors and recipients. The variant of the DA algorithm is designed to carry out multiple rounds of matching, give donors and recipients the opportunity to select the matching priority list based on various factors and use a reasonable matching mechanism to achieve Pareto efficient, strategy-proof, and stable matching. Therefore, the application of the variation of the DA algorithm in the donation problem can better match the needs, so that the platform can complete a more reasonable and efficient donation matching.

The impact of Blockchain adoption on supply chain performance: evidence from food industry

The food supply chain (FSC) constantly needs to address persistent challenges such as information asymmetry, low transparency, food quality and authenticity, and unnecessary waste. Blockchain is perceived as a promising solution to overcome these FSC challenges. Existing literature captures a conceptual understanding of various aspects of Blockchain for FSC, such as how the technology can enhance transparency, efficiency, and food authenticity. However, a quantitative assessment of the overall impact of Blockchain adoption on the FSC operational performance is still missing. This study combines empirical and analytical approaches to investigate the evident research gap. Under the lens of systems thinking and System Dynamics (SD) modelling perspective, the study collected questionnaire and interview data to develop different FSC models for evaluating the impact of Blockchain on key operational performance metrics. The findings indicated that Blockchain positively affects inventory level and lead time in the immediate term, and cost in the long term. The results also warn that forgoing inventory buffers can come with the cost-of-service level. This study provides quantitative evidence of the positive influence of Blockchain on the FSC. This research contributes by extending the understanding of Blockchain's implications on broader supply chain performance from a systems perspective.

Going Green: Effect of green bond issuance on corporate debt financing costs

This paper investigates the influence of green bond (GB) issuance on the credit spread of non-green bonds (NGBs) issued by the same firm. Based on Chinese bond market data from 2013 to 2021, our results show that GB issuers experience a decline in NGB credit spreads after issuing GBs, indicating that “going green” can lower corporate debt financing costs. This beneficial effect is more salient among firms with lower bond liquidity, supporting the “bond liquidity story” that investors anticipate increased bond liquidity following GB issuance and thus charge lower credit spreads. In contrast, we find limited evidence for alternative explanations such as the “default risk story,” “halo effect story,” or “information asymmetry story.” Our research highlights the financial benefits of GB issuance and contributes to related literature on the economic implications of green finance. The findings also offer valuable insights for policymakers and corporate executives seeking to promote sustainable investment.

Prorogation by submission under art. 26 of Brussels Ibis Regulation and the protection of weaker parties

Section 7 of Chapter II of the Brussels Ibis Regulation deals with prorogation of juris-diction. The choice of jurisdiction can be made by a choice-of-court agreement or by a trust provision (Art. 25), or by submission to the court seized (Art. 26). The purpose of Art. 26 is, in part, common to the purpose of Art. 25: to respect freedom of choice. However, where one of the parties is a typically weaker party, it may be appropriate to limit freedom of choice or, as it is the case in Art. 26(2), to provide for a duty of information aimed at overcoming the information asymmetry between the parties. The present essay addresses the main interpretation and gap filling issues arising therefrom.

The Ripple Effects of Financial Fraud: Investor Trust and Risk Appetite Post-Kangmei Pharmaceutical

The financial fraud at Kangmei Pharmaceutical (stock code: 600518) has had profound implications for retail investors. This paper, through data analysis, explores the correlation between information asymmetry and investment outcomes for retail investors. Information asymmetry often leaves retail investors unable to access the true financial state and operational conditions of companies, leading them to make speculative investments. Post-exposure, as information transparency increased, retail investors became aware of the company's financial issues and rushed to sell, causing a stock plunge. This highlights how information asymmetry not only affects investment decisions but also amplifies market volatility. To mitigate risks from information asymmetry, regulators must strengthen oversight and penalties, improve disclosure transparency and authenticity, while investors need to enhance self-protection awareness and information gathering and analysis capabilities. Only then can we minimize the impact of information asymmetry on retail investors and uphold fairness and stability in financial markets. This paper suggests that by implementing a robust regulatory framework and encouraging proactive investor education, we can better safeguard retail investors from the detrimental effects of information asymmetry, thereby fostering a more resilient and equitable financial market ecosystem.

Effect of media freedom on liquidity and information asymmetry: evidence from non-U.S. stocks in the NYSE

ABSTRACT While previous studies have mainly explored the impact of media freedom on macroeconomic variables, there is a relative scarcity of research on how media freedom affects stock markets. This paper examines the relationship between media freedom and the liquidity and information asymmetry of non-U.S. stocks listed on the New York Stock Exchange by demonstrating how these factors affect the liquidity dynamics of stocks from countries with varying degrees of media freedom. Ultimately, this study reveals that non-U.S. stocks from countries with limited press freedom experience poorer market liquidity. These conclusions hold even when considering a broader concept, voice and accountability, which includes media freedom, as well as different measures of liquidity and asymmetry, which reaffirms the reliability of the results. Our research illustrates the vital significance of media freedom in enhancing the liquidity of individual company stocks and mitigating market information asymmetry, suggesting that a nation’s press freedom can profoundly influence its stock market performance.

The Applicability of The Pecking Order Theory in The Digital Economy

The Peck Order Theory (POT), proposed by Myers and Majluf in 1984, posits that firms prioritize their sources of financing based on the principle of least resistance, starting with internal financing, followed by debt, and ending with equity as a last resort. In the context of the digital economy—which is defined by new finance mechanisms and technical advancements like big data, blockchain, crowdsourcing, and artificial intelligence (AI)—this study investigates the applicability and relevance of POT. This study investigates how these contemporary tools impact conventional financing behaviors and preferences through an extensive literature review.The findings suggest that while POT remains a powerful framework, its application in the digital age needs to be modified to account for the reduced information asymmetry and increased efficiency brought about by digital innovations.

Mega corruptions in mega projects: Debating the dynamics of dam construction in Ethiopia

Background This study critically examines the dynamics of corruption within Ethiopia’s dam construction projects, focusing on the Grand Ethiopian Renaissance Dam (GERD the Gilgel Gibe series, and Genale Dawa. The research highlights how weak management practices, insufficient oversight, and centralized decision-making, resulting in contribute to inflated costs, project delays, and compromised construction quality. A comprehensive understanding of these issues is crucial for addressing the challenges that impede Ethiopia’s infrastructure development. Methods A qualitative research approach was employed, integrating both primary and secondary data sources. The study utilized four theoretical frameworks—Principal-Agent Theory, Rent-Seeking Theory, Institutional Theory, and Neo-Patrimonialism—to analyze the structural and behavioral factors enabling corruption in Ethiopia’s dam construction projects. Results The study found that corruption is largely driven by weak management practices, insufficient oversight, and centralized decision-making. These factors contribute to inflated project costs, significant delays, and compromised construction quality. The lack of transparency and inadequate monitoring exacerbate these issues, leading to inefficient resource use and undermining the projects’ intended benefits. Economic impacts include increased public debt and strained financial resources. Socially, corruption erodes public trust and adversely affects the communities involved. The findings also highlight how information asymmetry and misaligned incentives contribute to corruption, with weak governance structures and informal networks further exacerbating the problem. These issues lead to cost overruns, increased debt, and diminished public confidence, which negatively impacts development outcomes. Conclusions While corruption in Ethiopia’s dam construction projects poses significant challenges, it is not insurmountable. Strengthening legal and regulatory frameworks, enhancing institutional capacity, promoting community participation, and leveraging international cooperation are crucial for mitigating these risks. Recommendations include implementing e-procurement systems, establishing independent oversight bodies, and promoting transparency to ensure these mega projects achieve their intended economic and social benefits.

Corporate ESG performance and credit misallocation: Evidence from China

Using data from Chinese-listed companies from 2010 to 2020, this paper investigates the impact of corporate environmental, social, and governance (ESG) performance on credit misallocation. We find that ESG performance significantly reduces credit misallocation, which remains robust to various sensitivity tests. Mechanism analysis reveals that ESG reduces credit misallocation by alleviating information asymmetry. This “information supplementary effect” is primarily evident at the firm rather than the macro level. Further discussion reveals a more pronounced impact of ESG in firms with lower profitability and higher market competition, as well as those located in less financially developed regions. However, this impact becomes less salient during periods of credit expansion. Our research highlights the importance of corporate ESG performance in deterring information asymmetry, and provides insights into improving the resource allocation efficiency in the credit market.

The effect of information asymmetry, budget emphasis, individual capacity and self esteem on budget performance with budgetary slack as a mediation variable and budget participation as a moderating variable in regional apparatus organizations in Berau district

The effect of information asymmetry, budget emphasis, individual capacity and self esteem on budget performance with budgetary slack as a mediation variable and budget participation as a moderating variable in regional apparatus organizations in Berau district