Information Asymmetry Perspective Research Articles

Information shock, market reaction, and stock message board information diffusion

We investigate the market reaction to information shocks in the Chinese stock market and study the process of information diffusion among investors on the stock message board. We find that investors tend to overreact to information shocks and the communications on the stock message board facilitate this overreaction. Further analysis shows that stock market overreaction is more significant in response to small and medium-cap shocks, and the degree of overreaction decreass with increasing liquidity. Our empirical results provide significant evidence of how information spreads among retail investors from the perspective of investor overconfidence and information asymmetry.

Segmented compensation mechanism for technological innovation of civilian enterprises’ participation in military: a perspective of dual information asymmetry

PurposeBased on dual information asymmetry, the two-stage segmented compensation mechanism for technological innovation of civilian enterprises’ participation in military (CEPIM) has been discussed.Design/methodology/approachOn the basis of the traditional principal-agent problems, the incentive compatibility condition is introduced as well as the hybrid incentive compensation model is established, to solve optimal solution of the compensation parameters under the dynamic contract condition and the validity is verified by numerical simulation.FindingsThe results show that: (1) The two-stage segmented compensation mechanism has the functions of “self-selection” and “stimulus to the strong”, (2) It promotes the civilian enterprises to obtain more innovation benefit compensation through the second stage, (3) There is an inverted U-shaped relationship between government compensation effectiveness and the innovation ability of compensation objects and (4) The “compensable threshold” and “optimal compensation threshold” should be set, respectively, to assess the applicability and priority of compensation.Originality/valueIn this paper, through numerical simulation, the optimal solution for two-stage segmented compensation, segmented compensation coefficient, expected returns for all parties and excess expected returns have been verified under various information asymmetry. The results show that the mechanism of two-stage segmented compensation can improve the expected returns for both civilian enterprises and the government. However, under dual information asymmetry, for innovation ability of the intended compensation candidates, a “compensation threshold” should be set to determine whether the compensation should be carried out, furthermore an “optimal compensation threshold” should be set to determine the compensation priority.

Do anti-takeover provisions restrain IPO underpricing? An analysis from the perspective of information asymmetry

PurposeBased on the textual-analyzed data covering 2148 IPO firms in China’s stock market during the 2007–2018 period, the authors’ purpose is to examine the influence of anti-takeover provision (ATP) adoption on initial public offerings (IPO) underpricing and identify the reducing effect of the former.Design/methodology/approachThe authors examine the sample consisting of Chinese A-share listed IPO firms between 2007 and 2018 from China Stock Market Accounting Research and Chinese Research Data Services, with ATP data collected from the IPO firm chapters. Specifically, the authors use text analysis to identify whether there are ATPs in the IPO firm chapters, as well as the number of ATPs. H1: IPO underpricing is less severe for firms adopting ATPs. H2: The effect of ATP adoption on IPO underpricing is more salient for firms in worse information environments.FindingsThe authors examine the influence of ATP adoption on IPO underpricing and identify the reducing effect of the former. This effect can be explained by the fact that adopting ATPs in IPO firm chapters can reduce information asymmetry to a large extent by helping external investors obtain more private information, which alleviates IPO underpricing. The authors also find that the reducing effect is more significant in the worsened information environment. Furthermore, the authors explore the influence of adopting ATPs on other IPO characteristics and find positive effects on IPO over-subscription, funds raised and trading activity and negative effects on listing fees.Originality/valueThis study mainly contributes to the literature from the following two aspects. First, the study enriches the literature about the influencing factors of IPO underpricing. Second, the study also enriches the literature about the economic consequences of ATP adoption. This study also has important policy implications. With the coming of the era of decentralized ownership in China’s capital market, ATP adoption has become more important and attracted more attention. Also, investors focus more on pricing efficiency. The findings in this paper provide a more comprehensive understanding of the relationship between ATP adoption and IPO underpricing.

Impact of digital finance on enterprise green innovation: From the perspective of information asymmetry, consumer demand and factor market distortions.

The study endeavors to empirically assess the influence of digital finance on promoting enterprise green innovation, while simultaneously probing its underlying mechanisms, by leveraging panel data from a sample of 2071 China A-share listed firms over an extensive time frame spanning from 2011 to 2021. The findings demonstrate that digital finance plays a crucial role in promoting enterprise green innovation, and that both the coverage breadth and usage depth of digital finance have a significant effect on enterprise green innovation, but the digitization level of digital finance also has a non-significant effect on enterprise green innovation, and the conclusions hold even after multiple robustness tests and consideration of endogeneity issues. Furthermore, heterogeneity analysis reveals that digital finance is only has a significant promoting effect on green innovation of SMEs, and high-tech enterprises. After conducting the mechanism analysis, it has been noted that digital finance serves as a facilitator in promoting green innovation in enterprises by reducing information asymmetry, stimulating consumer demand, and attenuating the distortion of regional factor markets. Intellectual property protection and environmental governance will strengthen the positive impact of digital finance on enterprises' green innovation. The research results provide policy implications for the green development of digital finance enabling enterprises.

Contribution to the Impact of Incubator on Nascent Startup Performance -- From Agency-problem Perspective

This study provides a novel model to discuss the function of incubator on startups by combining agency theory and social capital theory. The analysis is based on the assumption that the agency cost in startup business operations results in higher information asymmetry for creditors and equity investors in firm evaluation, which leads to more obstacles to a startups access to funding. The emphasis is on the startups operating environment from the perspective of goal-directed conflict and information asymmetry. The inference is conducted based on antecedent literature that mainly relied on social capital theory, and we try to shed light by adding agency theory to extend the boundaries of current studies. The implications of this result indicate the improved efficiency of utilizing an incubator in alleviating the complexity of a startups operating environment. The study provides insight into future policy making in startup development and incubator-related assistance.

Investigating the effect of social media fake news on consumer behavior: an empirical study with multiple moderations

ABSTRACT The severity and prevalence of fake news on social media (SM) are growing, which leave detrimental effects to businesses. Therefore, understanding consumer behavior when they are exposed to SM fake news is important. From the perspective of information asymmetry and signaling theory, this study derives that the negative effect of fake news on consumer trust is further reinforced in the presence of information asymmetry. Conversely, vendors’ signal credibility and consumers’ perceived vendor reputation diminish the effect of SM fake news on consumer trust. Our research model is empirically validated via an online survey. The results support these three moderation effects. In addition, the results indicate that consumers’ brand bias is a direct predictor of consumer purchase behavior. The findings suggest development of strategies for marketing managers and executives to mitigate the impact of SM fake news by signaling techniques. Further implications for research and practice along with future research opportunities are offered.

Enterprise Transformation and Innovation: A Study of Performance Compensation from the Perspective of Information Asymmetry

Information asymmetry is a key factor affecting M&A performance. In order to preserve value, performance promises are increasingly used in mergers and acquisitions; however, in practical applications performance often falls short of standards. This paper aims to explore how technology-based companies choose performance-based compensation methods from the perspective of information asymmetry by performing regression analysis on the unbalanced panel data. The results show that both equity compensation and annual compensation are more conducive to fulfilling corporate commitments, and two-way compensation enhances the incentive effect of commitments. In addition, technology companies should choose the method of equity compensation and annual compensation to alleviate the degree of information asymmetry by ensuring the degree of completion. Compensation methods can affect the fulfillment of commitments by improving corporate performance, and the degree of impact is different under different corporate governance qualities and debt repayment pressures. Revealing the performance compensation mechanism for fulfilling performance commitments not only expands the research perspective of performance commitments, but also provides a decision-making basis for enterprises to sign commitment agreements.

Uncertainty in the platform market: The information asymmetry perspective

The platform market, where a platform serves as both market maker and regulator, has received increasing attention in recent years. Despite great success, the inherent uncertainty of the platform market has hindered its overall development. Previous papers have studied uncertainty by focusing on either sellers or products, ignoring a platform's significant effects. To fill this void, we propose and validate a new dimension of uncertainty in the platform market: platform uncertainty. To examine the systematic dimensions of uncertainty in the platform market and reveal its consequences and antecedents, we utilize the perspective of information asymmetry. Structural equation modeling is used to build a theoretical framework, and we then conduct a survey among 352 consumers of a leading commerce platform in China to collect our data. We use the partial least squares (PLS) method to validate our hypotheses. Our empirical analysis provides the results that follow: First, we confirm that platform uncertainty is not only distinct from seller uncertainty and product uncertainty but also impacts both of these aspects. Consumers' perceived platform uncertainty positively influences their perceived seller uncertainty and product uncertainty. Consequently, these three dimensions of uncertainty negatively influence consumers' purchase intention. We also find that platform uncertainty negatively and indirectly influences consumers' purchase intention by impacting seller uncertainty. We demonstrate that consumers' concerns about a platform's hidden characteristics and opportunistic behavior contribute to platform uncertainty. These two significant antecedents explain much of the variance in platform uncertainty.

Determinant of Sukuk Issuance in Indonesia From Information Asymmetry Perspective (2013-2022)

Previous research found that sukuk is more exposed to information asymmetry problems, especially adverse selection, than bond. Indonesia as the third largest country for sukuk market falls below its peers in terms of governance. It means the information asymmetry in Indonesia is relatively higher which could reduce market effectiveness. So to improve sukuk market in Indonesia, studying the implication of information asymmetry and how it affects the capital structure decision is important. This study try to explain the issuance of sukuk in Indonesia 2013-2022 from information asymmetry perspective. This study uses secondary data from 2013-2022 and would be done by using logistic regression to conclude if the variables representing adverse selection and moral hazard affect the decision of sukuk issuance. Our regression found evidence of adverse selection in Indonesia sukuk market but did not find moral hazard problem. The result supports previous research that concludes that sukuk structuration leads firms with higher financial distress and a lower reputation to enter the market. The result could help investor to understand sukuk market and review their risk management procedure. It could also become additional material for government to design a suitable regulatory environment for a more govern sukuk market that would improve the development of sukuk market.

The impact of green financial development on stock price crash risk from the perspective of information asymmetry in Chinese listed companies.

Solving the crash risk problem of corporate stock price caused by information asymmetry can mitigate the negative externality of its carbon emission to become green, low-carbon, and high-quality development. Green finance generally profoundly impacts micro-corporate economics and macro-financial systems but remains a giant puzzle of whether they can effectively resolve the crash risk. This paper examined the impact of green financial development on the stock price crash risk using the sample data of non-financial listed companies in Shanghai and Shenzhen A stock market in China from 2009 to 2020. We found that green financial development significantly inhibits the stock price crash risk; this is more obvious in listed companies with a high level of asymmetric information. And companies in high-level regions of green financial development attracted more attention from institutional investors and analysts. As a result, they disclosed more information about their operational status, thus reducing the crash risk of corporate stock price from the torrential public pressure of lousy environmental details. Therefore, this study will help continuously discuss the costs, benefits, and value promotion of green finance for synergy between corporate performance and environmental performance to improve ESG capabilities.

Does fintech inhibit corporate greenwashing behavior?-Evidence from China

Green ecology is not only important strategies for enterprises to gain competitive advantage, but also one of the key indicators to measure the high quality of economic development. Based on the perspective of information asymmetry and listed companies’ data from China, this paper examines the impact of fintech on corporate greenwashing behavior and the mediating role of financing constraints. We find that financial technology significantly inhibits corporate greenwashing behavior and financing constraints positively reinforce this inhibitory effect. The study provides practical implications for preventing corporate greenwash behavior and promoting the high-quality development of corporate green ecological civilization.

Sustainable Consumption Models for Customers: Investigating the Significant Antecedents of Green Purchase Behavior from the Perspective of Information Asymmetry, Perceived Risk and Value with Mediating Role of Green Trust

Sustainable Consumption Models for Customers: Investigating the Significant Antecedents of Green Purchase Behavior from the Perspective of Information Asymmetry, Perceived Risk and Value with Mediating Role of Green Trust

DIVIDEND POLICY AS A SUPPLY OF COMPANY FINANCIAL FLOWS IN THE PERSPECTIVE OF INFORMATION ASYMMETRY AND OWNERSHIP STRUCTURE

Dividend policy is one of the important factors that supply the company's financial flows and operational activities. This study examines the determinants of dividend policy from the perspective of information asymmetry and institutional ownership. The research sample is the companies listed on Indonesia Stock Exchange that pay dividend consecutively from 2016 to 2020. The method of analysis is SEM-PLS operated with WarpPLS 8.0. The results showed that high information asymmetry between company management and shareholders encourages managers to reduce dividend payments for the purpose of providing company capital and production activities. Furthermore, the existence of institutional ownership supports managers' policies and prefers that company profits should be used to supply capital, not be distributed to shareholders. This finding is consistent with the pecking order theory and also implicates the need for a corporate governance system to be improved to give better protection to the investors.

Corporate strategic deviance and stock price volatility: from the perspective of information asymmetry

ABSTRACT This study investigates the effect of corporate strategic deviance on stock price volatility based on the perspective of information asymmetry. We find that corporate strategy deviance significantly increases stock price volatility, and information asymmetry is the leading cause of this increasing effect. Furthermore, analyst coverage has played a role in alleviating information asymmetry which reduces the positive effect of strategic deviance on stock price volatility.

Can Network Infrastructure Construction Alleviate Corporate Financing Constraints?

T The construction of network infrastructure is conducive to promoting enterprises to ease financing constraints, which is of great practical significance for optimizing the allocation efficiency of enterprise factors and promoting high-quality economic development. Based on the perspective of information asymmetry, taking the "Broadband China" pilot as a natural experiment, using the data of Chinese listed companies from 2009 to 2020, and using the multi-period double difference method to empirically test the impact of network infrastructure construction on the constraint level of enterprise financing and verify its internal mechanism. The study found that the construction of network infrastructure helps to alleviate the financing constraint level of enterprises. Heterogeneity analysis shows that the policy significantly alleviates the financing constraints of large-scale enterprises, but the impact on small and medium-sized enterprises is not significant. The conclusions of this paper not only broaden the perspective of "new infrastructure" research, but also provide reliable empirical evidence and policy implications for the impact of network infrastructure construction on micro-enterprise behavior.

Evolutionary game analysis between employees and employers about working overtime from the perspective of information asymmetry

BackgroundOvertime is an international phenomenon, especially in some Chinese Internet technology companies, the 996 work regime is a common corporate atmosphere. This paper holds that overtime work is the result of a long-term dynamic game between employees and employers. In such a dynamic evolution process, employers and employees both cooperate and conflict, they will choose a strategy conducive to their own development through long-term learning and improvement.MethodsBased on the evolutionary game theory and principal-agent theory, this paper constructs a 2times 2 evolutionary game matrix. The strategies of employees can be divided into voluntary overtime and involuntary overtime, while the strategies of employers can be divided into providing overtime pay and not providing overtime pay. The stability of the system is related to four parameters: resource consumption, information asymmetry coefficient, trust coefficient, and moral hazard coefficient.ResultsThrough an in-depth study of the model and data simulation, the system has five equilibrium points, an ESS point, and a saddle point in any case. Accordingly, we put forward two theorems and three propositions, which are verified not only theoretically but also by data simulation. Besides, the strategies of the employees and the employers will evolve from the initial state to (Involuntarily, Not pay) or (Voluntarily, Pay) under different situations. This is closely related to the initial parameters of the evolutionary game model and the payment matrix.ConclusionsBy summarizing the influence of each parameter on the evolutionary path, we believe that fairness and information equivalence between employees and employers can effectively promote both parties to reach the Pareto optimal state. In other words, employees and employers need to communicate and share information promptly to ensure the unity of information acquired by each other and achieve a win–win situation. This paper contributes to providing theoretical guidance and practical enlightenment for organizations to manage employees' overtime behavior scientifically and improve their work psychology reasonably.

Mitigating information asymmetry in inventory pledge financing through the Internet of things and blockchain

PurposeRisks resulted from asymmetric information have become crucial barriers for commercial banks to implement supply chain finance (SCF) – mainly the inventory pledge financing (IPF). At the same time, online financial service providers (OFSPs) are emerging as strong competitors in the SCF market. As a result, commercial banks need to update their traditional SCF business models and alleviate their over-dependence on OFSPs.Design/methodology/approachThe authors employ a multi-case-study method to investigate how the Internet of things (IoT) and blockchain technologies can be jointly leveraged to mitigate SCF risks. In-depth interviews were conducted to depict the business models and their novel ecosystem to reinforce traditional banks' ability in SCF services.FindingsFrom the perspective of information asymmetry, the authors categorize IPF risks into three groups based on the principal-agent theory: collateral, warehousing and liquidity risk. The findings suggest that IoT can primarily improve traditional banks' information acquisition ability, and blockchain can facilitate credible information transformation, enabling banks to acquire knowledge from collaterals. Besides, the e-platform in the new architecture increases banks' involvement in the supply chain and builds a fair network to curtail warehousing risks. The employment of smart contracts and collaborative mechanism ensure process and outcome control in mitigating liquidity risks.Originality/valueThe research contributes to the literature by confirming the role of emerging technologies in reducing information asymmetry risks. Besides, the findings provide valuable insights for practitioners to promote effective practices and approaches in IPF.

Competitive Brokerage: How Information Management Capability And Collaboration Networks Act As Substitutes

ABSTRACT IT-based information management and collaboration networks are both important sources of competitive information. Despite anecdotal evidence, limited research examines their contemporaneous impact on firms’ ability to compete effectively. We take an information asymmetry perspective to examine the mechanisms through which the firm’s information management capability and the structure of its collaboration network influence the structure of its competition network in product markets. We argue that taking a brokerage position in competition networks has a positive influence on a firm’s performance. We then explain how the firm’s information management capability and its position in collaboration networks each have a direct positive influence on its brokerage position in the competition network. Finally, we propose that information management capability and a central position in collaboration networks act as substitutes. We empirically test our model using a longitudinal competition network, a longitudinal collaboration network, and longitudinal secondary data about firms’ information management capability, drawn from 262 firms over a 15-year period. Our findings, robust to endogeneity concerns and alternative model specifications, reveal the direct and substitution effects of information management capability and collaboration networks on competition networks. This research contributes to the information systems and strategy literatures by offering insights into how IT enables firms to design competitive strategies by facilitating analyses of competitors’ information, and how the information gained by firms as they collaborate can enhance their ability to compete.

Board secretary and market information efficiency: Evidence from corporate site visits

Using the setting of corporate site visits, this study examines the information interpretation role of board secretaries on market information efficiency. We find that the presence of the board secretary during corporate site visits can significantly improve the information content of such visits. From the perspective of information interpretation ability, when the board secretary has a dual role, receives high relative compensation, and has a high level of education, his or her participation in site visits has a greater effect on improving the informativeness of such visits. From the perspective of information asymmetry, the information interpretation role of the board secretary is more pronounced when the level of information asymmetry between the firm and its investors is high. Further analysis shows that when the board secretary attends more site visits, the level of analyst forecast error is lower. In summary, we confirm the information interpretation role of board secretaries, which is useful for opening the “black box” of their participation in the information assimilation process and for better understanding of how to improve market information efficiency.

Board composition, ownership structure and firm performance: New Indian evidence

This paper studies the impact of board composition and ownership structure on accounting as well as market performance of Indian firms in presence of certain unique statutory provisions relating to independent directors and limits on ownership concentration. The study uses a sample of 265 non-finance, non-banking and non-PSU Indian companies of S&P 500 index and applies OLS models initially. Having identified evidence of a possible feedback loop, the study then employs instrumental variables and 2 SLS models to explore how firm performance is impacted by ownership concentration and board composition after controlling for firm-level and industry-level characteristics. A series of robustness tests are used to substantiate the findings from the main analysis. A two-way relationship and ‘nonlinearity’ are recorded between market performance and ownership concentration. The study shows that a moderate-to-high ownership concentration between 25 and 75%enhances firm performance and very low level of concentration adversely impacts the same. Performance is positively impacted by board size but not by board independence. The findings of the study become particularly important for legislators and investors in the backdrop of SEBI’s regulations fixing a maximum limit on promoter’s shareholding and existence of a minimum external directors in the board for listed Indian companies that might have an implication on firm performance from liquidity, agency and information asymmetry perspective. The study documents that an optimal shareholding concentration and large board size with internal directors rather than a high percentage of independent external directors leads to value creation in Indian context. The paper provides new insights onto the relationship between board composition, ownership structure and firm performance in the backdrop of regulations brought out by SEBI in this behalf. The findings of the study have varying degree of application in common law origin countries with strong regulatory framework for investors’ protection.