Information Asymmetry Research Articles

The impact of supply chain finance on financial constraints of small and medium-sized enterprises and the moderating factors

ABSTRACT Supply chain finance (SCF) has gained significant popularity and has been extensively implemented in practical applications to facilitate cash flow by involving financial institutions. However, there are very few empirical studies on SCF. This study examines whether and how much SCF can alleviate financial constraints of small and medium-sized enterprises (SMEs). Furthermore, we examine the impact of information asymmetry, financial development depth, and economic policy uncertainty on the effectiveness of SCF. These three moderating factors correspond to the influence of firms, local financial development, and national government on SCF effectiveness, respectively. The empirical analysis shows that SCF can alleviate SMEs’ financial constraints significantly, and this effect is more pronounced for firms with higher information disclosure quality and located in financially developed areas. Our findings have important implications for firms and authorities, such as understanding the dynamics of SCF and developing appropriate measures and frameworks to promote the broad adoption and effective utilization of SCF.

The Advance and Spot Selling Strategy Under Quality Information Asymmetry

ABSTRACTWe study firms' optimal pricing and quality selection in the advance period and the spot period under the information asymmetry. Our study theoretically demonstrates that the advance price as a signal of quality information can affect the separating and pooling equilibrium. Importantly, we find that separating equilibrium is more favorable for high cost‐efficiency if consumers have low prior probability that the firm is high cost‐efficiency. For the firm with low cost‐efficiency, the benefit of the separating equilibrium is the same as information is common sense. But no matter which equilibrium firms choose, they will target all consumers during the spot period.

The economic potential for area‐yield crop insurance: An application to maize in Ghana

AbstractRainfall index insurance can enable farm households to manage production risk, but demand in developing countries remains low at market prices, in part because the insurance trigger may not correlate well with individual farm losses. Area‐yield crop insurance, which links payouts to average yield in a geographic zone, attempts to increase demand by more accurately targeting insurance payouts to production shortfalls. However, shifting from an exogenous weather‐based to an endogenous yield‐based index introduces concerns of asymmetric information, which can lead to market failures that constrain supply from providers. These features are inversely related: larger insurance zones inhibit index manipulation, but average yield is less informative about any individual plot. We quantify this tradeoff for maize in Ghana using a spatial yield model calibrated to match observed production. Insurers must demarcate zones of no more than 5000 farmers for area‐yield insurance to outperform weather insurance. The framework presented in this paper allows assessment of the relationship between index performance and asymmetric information in new crop insurance products.

Platform power and regulatory capture in digital governance

Abstract Digital governance is a public concern, yet under private control. After numerous scandals, all stakeholders in the European Union (EU) agreed to establish a “novel constitution for the internet” that would effectively constrain the power of large platforms. Yet the Digital Services Act (DSA) ultimately legitimized and institutionalized their position as the gatekeepers of the internet. Why? We argue that platforms prevailed thanks to their ability as intermediaries to quietly shape the available policy options. Our “platform power mechanism” combines institutional and ideational sources of business power to show how big tech drew on its entrenched position as an indispensable provider of essential services and promulgated the idea of itself as a responsible and neutral intermediary. We follow the unfolding of platform power through a process-tracing analysis of Google and Meta’s activities with respect to DSA legislation from its announcement (2020) to its adoption (2022). Besides contributing a reconceptualization of the DSA as a regulatory capture, we integrate the notion of platform power into a “regulator–intermediary–target” model and demonstrate how gatekeepers have exploited information asymmetries to share “the public space.” Our analysis thus supplements established approaches that have derived regulators’ deference to platforms from the tacit allegiance of consumers.

Information sharing decision of retail platform: platform's risk aversion and competing suppliers

An increasing number of retail platforms are adopting blockchain technology to mitigate information asymmetries and share data with upstream suppliers, thereby reducing demand uncertainty. However, these platforms often engage with multiple upstream suppliers of varying product quality. This study constructs a game-theoretic model within a supply chain framework, featuring a risk-averse retail platform and two upstream suppliers of different quality levels. As the core leader of the game, the retail platform decides whether to share demand information with the two competing suppliers after implementing the technology. Using mean-variance theory, this study addresses a key question: Which types of suppliers should be included in information sharing on a retail platform? The results show that when the unit cost of information sharing is low, allowing both suppliers to share demand information is most beneficial. Conversely, when the unit cost is high, only high-quality suppliers should be included. Notably, as the unit cost of information sharing and the intensity of competition between high-quality and low-quality products increase, low-quality suppliers are excluded from information sharing. Additionally, the model indicates that the greatest social welfare can be achieved whether both high-quality and low-quality suppliers are authorized to join the information sharing network, or only high-quality suppliers are included.

Does reduced boilerplate of KAMs indicate increased audit effort? Evidence from China

By examining the effects of media coverage and legal environment and the modifying effect of auditors' market shares, this paper investigates whether reduced boilerplate of key audit matters (KAMs) reflects increased audit effort. Our findings indicate that auditors can change boilerplate of KAMs according to the tone of media coverage: auditors may reduce boilerplate of KAMs when firms are exposed to more negative media coverage and may increase boilerplate of KAMs when firms are exposed to more positive media coverage. Auditors of firms that are exposed to weaker legal environment reduce boilerplate of KAMs. Boilerplate of KAMs disclosed by audit firms with larger market shares is more significantly influenced by negative media coverage and legal environment than those with smaller market shares. Additionally, the effects of media coverage and legal environment on boilerplate of KAMs are only significant for the sub-samples with non-state-owned enterprises (non-SOEs) and higher information symmetry. These results prove that reduced boilerplate of KAMs reflects increased audit effort.

Solving Wage Information Asymmetry: The Perspective of the European Union and Lithuania

The search for criteria and mechanisms for resolving the pay gap between men and women is one of the main directions of the equality policy of the European Union. More than half a century after the establishment of the principle of the right to equal pay for the same work or work of equal value, it became apparent that the pay gap between men’s and women’s wages remains unsealed. One reason is the wage information asymmetry between the employee and employer. This asymmetry was corrected in the Pay Transparency Directive of the European Union. The author examines the measures for adjusting information asymmetry on wages provided for in the directive. They are divided into three groups – the measures ensuring pay process transparency, the measures ensuring pay communication transparency, and the measures ensuring pay outcome transparency. Subsequently, obstacles and opportunities for the transfer of these measures to the Lithuanian legal system are discussed.

Influence of Corporate Information Transparency on Foreign Institutional Investors' Shareholding Behavior: Evidence from Public Listed Companies in China

In 2003, China implemented the Qualified Foreign Institutional Investor (QFII) system, which has garnered considerable interest from international institutional investors in the mainland market. As global investors, QFIIs depend significantly on precise, thorough information to bolster their investing criteria. Consequently, the transparency of corporate information becomes a crucial factor for QFIIs. However, due to the relatively late development of the Chinese market, an imbalanced structure of listed companies and information asymmetry, the information disclosure of listed companies has been subject to certain degrees of distortion. Therefore, to better facilitate the development of China's securities market and to help QFIIs fully realize their advanced value investment strategies, this paper aims to study the impact of corporate information transparency on the stockholding behavior of foreign institutional investors. This paper begins by reviewing the literature on the factors influencing institutional investor holdings, corporate transparency, and the characteristics of foreign institutional investors' stockholding. It then defines the concepts of corporate information transparency and foreign institutional investors, analyzes the current state of information transparency in Chinese listed companies, and examines the development of the QFII system in China. The theoretical framework explores the mechanisms through which corporate information transparency influences the stockholding behavior of foreign institutional investors. In the empirical analysis, the paper plans to measure the information transparency of listed companies from three perspectives: earnings quality, information ratings by the Shenzhen Stock Exchange, and the number of analyst followings, to investigate how corporate information transparency influences QFII stockholding behavior.

Can digital transformation promote hospitality and tourism firms’ investment? Moderating effect of financing constraints and economic policy uncertainty

ABSTRACT Research on corporate investment is widely acknowledged as essential in the realm of financial management within the hospitality and tourism sector. Drawing on information asymmetry and resource dependency theories, this study examines the effect of digital transformation on hospitality and tourism firm investment and explores how financing constraints and economic policy uncertainty moderate these effects. We utilized firms engaged in tourism, hotel, catering, and transportation, listed on the A-share market of China’s Shanghai and Shenzhen stock exchanges from 2009 to 2022, as our research sample. Our findings indicate that digital transformation enhances investment in hospitality and tourism companies. Furthermore, this positive effect was more pronounced for firms with reduced financing constraints and heightened economic policy uncertainty. These findings reveal ignored tourism and hospitality investment antecedents and enrich academic understanding by expanding firm-specific boundaries. This study provides practical insight into how hospitality and tourism firms can boost investment through digital transformation.

Psychological Determinants of Investment Decisions: Analyzing Financial Behavior in Personal Investments

Understanding the psychological factors that influence investor behavior is critical in the dynamic world of financial markets. Financial conduct encompasses the decisions and behaviors individuals exhibit in managing their finances, including investments in various asset classes. Factors such as risk tolerance, cognitive biases, emotional influences, and financial knowledge significantly shape investment outcomes. Gaining long-term financial success requires mastery over these behavioral aspects. This study investigates the influence of three psychological factors—information asymmetry, problem framing, and risk propensity—on the investment decisions of 220 active investors trading on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). A quantitative research approach was employed, utilizing a structured questionnaire to collect data. Statistical analyses, including regression and correlation analysis, were used to assess the relationships between these psychological variables and investment behaviors. The results reveal significant correlations between psychological factors and investment decisions. Information asymmetry, problem framing, and risk propensity were found to strongly influence individual investor choices. These findings shed light on the intricate role that cognitive biases and psychological processes play in shaping financial decision-making. The study's findings offer valuable insights into the psychological drivers behind investment behavior. By highlighting the impact of these factors, the research contributes to both academic understanding and practical applications for financial professionals. The results underscore the importance of enhancing financial literacy and investor education, enabling more informed decision-making and promoting improved financial outcomes.

A Review of Research Progress on the Impact of Information Asymmetry on Green Consumption

Abstract: This paper discusses the impact of information asymmetry on green consumption and sustainable consumption. It emphasizes the importance of information in promoting green consumer behavior and highlights the role of media publicity and evaluation systems in shaping consumer perception and decision-making. The paper also explores the influence of government policies and subsidies on green consumption, noting that government intervention can benefit the entire green product industry chain. The authors suggest that in order to reduce the impact of information asymmetry, comprehensive and high-quality information should be provided to consumers, and consumers should be educated on information filtering and processing. The paper concludes by emphasizing the need for further research on the quantitative assessment of green information dissemination, the influence of green information on consumer psychology and behavior, and the role of government information in promoting green consumption. It calls for a multi-party linkage mechanism to drive the sustainable development of green consumption.

Analysis of the Impact of PP&E Two Subsequent Measurement Models on Enterprise Financial Reporting and Financial Performance

Abstract: Measurement based on PP&E has been controversial in accounting in recent years. This paper analyzes the contributions and risks of two subsequent measurement models of PP&E to the financial reporting and performance of enterprises. It also explores the relationship between the two models. This study aims to provide a reference for companies in the selection of subsequent measurement model of PP&E. According to previous research, the cost model provides more timely and understandable information for financial reporting and reduces the cost of preparing reports. It also improves the objectivity and verifiability of financial performance. However, the cost model may not show the true value of a company's PP&E. The revaluation model provides more relevant information for financial reporting and reduces information asymmetry. It also positively affects the company's future financial performance. However, revaluation models are highly subjective, susceptible to bias manipulation, and can lead to misleading information due to value reversal. The relationship between the two models can be explained as a slow evolution from the cost model to the revaluation model, but not a complete replacement.

Risks, Resilience and Performance of Financial Mechanisms During the Health Crisis

Is there an “optimal resilience” model for organizations? Due to its status, the company is de facto concerned and regularly confronted with the constraints of the environments in which it operates. The latter are juxtaposed with regulatory, institutional and recently totally unprecedented health constraints. The antagonism of the « Risk/Return » couple on which financial theories are based is a model that has imposed itself in the terms of exchange between the bank and the company, thus resulting in a persistent informational asymmetry. But the repetition of financial shocks and the violent health crisis that occurred in January 2020 on a planetary scale forced the two parties to review their strategies. In this context, many systems have been put in place to enable organizations to stay on course. In particular, the loans guaranteed by the State distributed by the banks, which are at the same time active by the device and passive to bear the risk. Nevertheless, the banking sector has been able to develop in recent years a powerful architecture of operational resilience to fight against crises. What about the operational resilience model of companies that are suffering this double blow of external financial and health constraints for which they were not prepared? How these organizations were able to use financial devices for their profits. This is the analysis that is made under the triple report of effectiveness, efficiency and equity. Operational, theoretical and empirical resilience should also be analyzed. Theory to confront models of resilience. Empirical to analyze the reality of a given geographical area in order to identify a result. It emerges that the first « Toxi-Handler » (catalysts of their own suffering) are business leaders, a triple approach based on observation: individual, organization, means.

Research on Innovation of Food Logistics Supply Chain Management

In the context of globalization and constantly changing consumer demand, the management of food logistics supply chains has become increasingly complex and important. This paper mainly studies the problems and innovative methods in food logistics supply chain management, aiming to improve the efficiency and adaptability of the supply chain by optimizing management strategies. This paper adopts literature analysis and case analysis methods to analyze in detail the problems of information asymmetry, cost control, transportation efficiency, and inventory management in the food logistics supply chain. It proposes innovative supplier management models, digital management, modern supply chain management concepts, inter chain cooperation, and risk management solutions. Research has found that adopting information-sharing mechanisms and advanced information technology, as well as strengthening collaboration among various links in the supply chain, can effectively improve management efficiency and reduce operating costs. This study provides some useful references for food logistics enterprises in practical operation, helping them improve service quality and reduce operating costs in a fiercely competitive market environment, enhance market competitiveness, ensure food safety and freshness, and meet the growing needs of consumers.

Utilizing large‐scale insurance data sets to calibrate sub‐county level crop yields

AbstractCrop yields are crucial for research on agricultural risk and productivity but are typically only available at highly aggregated levels. Yield data at more granular levels of observation have the potential to enhance econometric identification and improve statistical power but are typically inaccessible. Crop insurance contracts offered via the US Federal Crop Insurance Program (FCIP) are priced, in part, based on past yields of the farm meaning year‐to‐year variation in premium rates has the potential to provide insight into how yields vary over time. This paper introduces methods to use observed FCIP rating parameters to calibrate yields for insurance transactions lacking such data. These methods are validated with 148,243 farm‐level observations from Kansas for which yields are known. The calibrated yields are applied empirically to examine the impact of asymmetric information in the FCIP via choice of insurance unit structure and the extent to which legislative changes mitigated this effect.

Mechanism Analysis and Path Study of Digital Transformation on Corporate Governance: Evidence from Chinese Listed Companies

Corporate digital transformation, primarily driven by data and leveraging digital technologies and mathematical algorithms such as Internet+, big data, cloud computing, artificial intelligence, and blockchain, is a crucial enabler of sustainable development. This transformation integrates various aspects of corporate production and operations, enhancing the level of digital operations and ultimately contributing to high-quality and sustainable development. This paper, based on data from listed companies in China’s A-shares from 2007 to 2021, theoretically articulates the intrinsic mechanism between corporate digital transformation and corporate governance level, with a focus on sustainability. It empirically finds that a higher degree of digital transformation correlates with an improved level of corporate governance, fostering sustainable practices. Further investigation reveals that digital transformation elevates corporate governance by enhancing innovation capabilities, reducing information asymmetry, and promoting sustainable strategies. This paper provides policy insights for promoting corporate digital transformation as a means to achieve sustainability goals and optimizing management’s corporate governance level for long-term sustainable success.

Does the Bike-Sharing Platform Share Its Own Private Information or Not in a Reverse Supply Chain?

Bike sharing facilitates the public’s daily lives and possesses substantial market demand, yet its overwhelming presence has triggered some environmental problems. To enhance resource utilization efficiency, we examine the decision-making strategies within a reverse supply chain considering the private information of the bike-sharing platform. Using Stackelberg games, two models are formulated in order to investigate whether the platform should share its own private information when the used shared bikes are recycled. A supply chain without private information is provided as a benchmark for comparison, and we obtain the optimal equilibrium strategies of the benchmark and the proposed model. Furthermore, how the optimal strategies change with the variation in parameters and the impacts of the private information on the optimal strategies are discussed. The results show that information asymmetry could lead to a reduction in supply chain efficiency. Thus, a two-part pricing contract is introduced to incentivize the platform to share information and coordinate the supply chain, which can effectively improve the performance of the integral supply chain and implement a “win-win” strategy for the third-party remanufacturer and the platform.

Institutional blockholder monitoring and stock price crash risk

We examine whether institutional investors can reduce the risk of stock price crashes caused by managers’ intentional withholding of bad news. Specifically, we focus on the effect of institutional blockholder monitoring on stock price crash risk. The empirical results show negative relationships between institutional blockholdings and various crash risk variables, which suggests that institutional blockholder monitoring of nontransparent managerial behaviors can decrease crash risk. Furthermore, we find that the influence of monitors is more pronounced in firms with high information asymmetry, thereby corroborating the institutional blockholder monitoring role. This study validates the monitoring role of dedicated institutional investors in agency-motivated managerial behaviors.

An Ethnographic Study of Chinese Business Expatriates in Tanzania

This ethnographic study investigates the motivations and experiences of Chinese business expatriates in Tanzania, focusing on their life management, language proficiency, and engagement with petty corruption. Chinese expatriates’ motivation for expatriation is often pragmatic, prioritizing family-oriented well-being over individual well-being. Language proficiency is shown to mediate power dynamics and reduce information asymmetry, while petty corruption is a strategic investment to navigate bureaucracy and secure benefits, despite an imbalance in reciprocity. This study enhances our understanding of the cross-cultural experiences of Chinese expatriates in Tanzania and offers valuable insights for effective International Human Resource Management (IHRM) practices.

Information asymmetry and public response: Evidence from the housing market

This paper takes the introduction of commission collection from sellers in the Chinese housing market as a significant shock, and reveals the role that information asymmetry plays in the market by examining the public's response to two types of commission collection. Our findings indicate that when sellers transition from a commission model that is solely borne by buyers to one that is shared between both buyers and sellers, the listing prices of housing decline significantly, by approximately 1.6 % to 2.3 %. In contrast, when sellers face no change in the commission structure, their listing prices do not show a significant decline. This reduction is primarily attributed to the new commission model mitigating the information asymmetry that sellers experience. This research offers valuable insights into the impact of information asymmetry in housing markets.