Reduce Information Asymmetry Research Articles

The impact of characteristic factors of the direct-to-consumer marketing model on consumer loyalty in the digital intermediary era.

In the era of digital intermediaries, the direct-to-consumer (DTC) marketing model is gaining prominence in the retail and brand marketing domains. This model exhibits a distinct advantage over traditional models in cultivating loyalty. Consequently, this study employs a survey-based approach and utilizes the Stimulus-Organism-Response (SOR) theory to construct a structural equation model and investigate the relationship between the DTC marketing model's characteristic factors and consumer loyalty. The results indicate that cost-effectiveness and social media marketing directly and positively influence consumer loyalty, while product features indirectly contribute to loyalty through perceived emotional value. Multi-channel integration indirectly influences loyalty through perceived functional value. Additionally, the varying degrees of influence highlight social media marketing as the most impactful factor and product features as the least influential. The research findings underscore the importance of strengthening social media marketing, optimizing product features, reducing information asymmetry, and integrating multiple channels to enhance consumer loyalty. This study enriches the understanding of the DTC theoretical framework in the field of marketing and provides new perspectives for formulating marketing strategies.

Does the Capital Market Value Carbon Emission Reductions? Evidence from China

ABSTRACT: An increasing number of Chinese companies are strengthening their commitment to corporate social responsibility (CSR) by reporting their carbon emission reductions. Research suggests that such voluntary environmental disclosures can reduce information asymmetry, decrease the cost of capital, and thus enhance firm value. However, a significant research gap exists because this evidence mainly derives from developed countries, with limited consideration given to emerging countries, where the capital market often lacks robust informational content. To fill this research gap, we endeavor to explore the firm-value effects of the disclosures and the magnitude of carbon reduction in China, the largest emerging market. By manually collecting data on carbon emission reductions from the CSR reports of Chinese listed companies from 2008 to 2013, we employ the balance sheet valuation model and ordinary least squares regression to investigate the firm-value effects of the disclosures and the magnitude of carbon emission reductions. The empirical results show that firm value is positively associated with not only voluntary carbon emission reduction disclosures, but also the magnitude of carbon emission reductions. In our sample, for every additional ton of carbon emission reduction, firm value increases by approximately 340 yuan (equivalent to 44 euros or 52 US dollars). We also find that the firm-value effects of carbon emission reductions are more pronounced in high-pollution industries than those in low-pollution industries. Further channel tests reveal that on average, agency problems, as measured by selling, general, and administrative expenses, are lower in firms that disclose carbon emission reduction information than those that do not. In addition, firms with carbon emission reduction disclosures can obtain more green subsidies than those without such disclosures. To mitigate climate risk, firms should proactively engage in carbon emission reductions, which can potentially receive a positive recognition from the capital market. Our study also provides valuable insights for regulators in terms of establishing and enhancing carbon accounting standards to encourage corporate involvement in carbon reductions.

The relationship between changes in corporate payout policy and capital structure

This paper aims to investigate the impact of corporate dividend policy on the capital structure in the Korean stock market. To distinctly discern the voluntariness of changes in corporate dividend policy, we analyze companies that, following a substantial increase, do not reduce dividends for the subsequent two years or, after a significant decrease, do not raise dividends for the following two years. Our empirical findings indicate that companies that increase dividends experience a significant decrease in both book and market leverage, even after controlling for variables such as target leverage ratios. This result suggests that a large increase in dividends can effectively reduce information asymmetry, leading to a lower cost of equity. On the contrary, after a decrease in dividends, both book leverage and market leverage significantly increase, revealing a symmetric relationship between dividend policy and capital structure. In conclusion, large dividend increases in Korean companies not only reduce information asymmetry but also lower the cost of equity capital, resulting in observable changes in the leverage ratio.

Halal Information in Customer Value Disclosure

Indonesia has a majority Muslim population, so consumers have the right to know the halalness of the products/services they consume. In addition, halal information can be of value to customers because it is a differentiator from similar products/services offered by other producers. This study aims to propose halal information as a novelty in Customer Value Disclosure (CVD). This novelty is important to reduce information asymmetry, provide value added and competitive advantage for companies, especially when operating in areas with a majority Muslim population. In addition, this novelty can be studied in further studies associated with other variables such as stock price, firm value, future profitability, cost of equity, personnel readiness and others. Through a literature review with reference to two studies that specifically discuss Customer Value Disclosure (CVD) and the annual reports of several companies, it is concluded that halal information can be added to the disclosure because the company has provided this information in the annual report. The information is in the form of the company's commitment and achievements towards halal products/services and halal certification obtained.

EMPIRICAL EVIDENCE OF MANAGERIAL OWNERSHIP, LEVERAGE, FINANCIAL DISTRESS, AND PROFITABILITY ON ACCOUNTING CONSERVATISM IN MINING COMPANIES LISTED ON THE INDONESIAN STOCK EXCHANGE DURING THE PERIOD OF 2018-2021

This research aims to empirically examine the impact of managerial ownership, leverage, financial distress, and profitability on accounting conservatism in mining companies listed on the Indonesia Stock Exchange (IDX) during the period of 2018-2021. The data used in this study is obtained from secondary data sources accessed through the company's annual reports and other websites. The research population consists of mining sector companies listed on the Indonesia Stock Exchange during the period of 2018-2021. The sampling technique used in this study is the purposive sampling method, which resulted in 24 out of the total 49 mining companies that have managerial ownership. A total of 24 companies were selected as samples over a period of 4 years, resulting in 96 financial report data samples. The data was processed using the IBM SPSS Statistic 24 application. The results of this study indicate that managerial ownership, leverage, financial distress, and profitability have an impact on accounting conservatism. Therefore, further studies are needed to expand these factors so that the findings can be more comprehensive. As a recommendation from this study, it is expected that companies can maintain and enhance the principle of accounting conservatism to reduce information asymmetry among shareholders, investors, or creditors. Keywords: Managerial Ownership, Leverage, Financial Distress, Profitability, Accounting Conservatism.

The Impact of Sentiment Scores Extracted from Product Descriptions on Customer Purchase Intention

This study investigates whether and how the textual content of product descriptions, especially the sentiment element, influences buyers’ purchase intentions. Using year-round digital transaction data from Mercari, a leading e-Commerce platform in Japan, we examine the interplay of hard and soft information signals exchanged between sellers and buyers. The study addresses two crucial questions: (1) Do the descriptions that sellers provide on product sales pages impact the buyer’s intent to purchase? and (2) In what way does the description influence the buyer’s purchase intention? Quantitative analysis is used to understand the relationship between product descriptions, sentiment elements, and purchase intentions. The results show that sentiment factors in product descriptions can serve as high-quality “signals” that can help buyers make informed purchasing decisions and reduce information asymmetry between buyers and sellers. This research contributes to understanding decision-making in online markets, particularly the role of soft information and sentiment analysis.

The impact of the corporate risk management model on the quality of financial reports in Jordanian commercial banks

The objective of this study is to empirically elucidate the influence of the corporate risk management model on the quality financial reports within the context of Jordanian commercial banks, with a specific focus on two critical dimensions: relevance and faithful representation. According to signal theory, each company tries to reduce information asymmetry by providing high-quality of financial reports that have the ability to demonstrate their qualities, depending on that concept. The predominant trend in contemporary practice is the utilization of risk management as a tool to elevate the quality of financial reports. This, in turn, assists in curtailing the manipulation of financial reports, culminating in the issuance of reports characterized by credibility and transparency. This, in turn, reflected on all different users of financial reports in the decision-making process. To accomplish the study's objectives, a descriptive-deductive (analytical) research approach was adopted. The research population encompassed a total of thirteen commercial banks operating at Jordan. Data were collected through a structured questionnaire administered to a randomly selected sample of 234 employees from the financial and supervisory departments of these banks. The study's results strongly suggest that the risk management model has a big effect on the quality of financial reports in Jordanian banks. This model includes things like setting goals, event identification, risk assessment, risk response, supervisory activities, and the evaluation of the financial reporting system.

Impact of interlocking directors with digital experience on corporate digitalization: Evidence from China

We examine the impact of interlocking directors with digital experience on corporate digitalization. Using a sample of Chinese listed firms from 2007 to 2021, we find that interlocking directors with digitalization experience have significant positive effect on the focal firm’s digitalization. Mechanism analyses further indicate that these interlocking directors play a pivotal role in enabling firms to reduce information asymmetry and alleviate financial constraints by weakening managerial myopia in the focal firm. Cross-sectional analyses highlight that the favorable effect of such interlocking directors mainly exists in non-SOEs and firms with younger CEOs.

Tác động của tính bất định đến tính không minh bạch của ngân hàng thương mại Việt Nam

The study examines the impact of uncertainty on bank opacity while particularly taking into account the moderating role of market structures. Using a sample of Vietnamese banks from 2007 to 2019, the paper measures uncertainty at the disaggregate level of the banking sector through the dispersion of bank shocks and regresses the bank opacity. The research introduces both structural and non-structural proxies of bank competition/concentration to better explore the role of market structures. Empirical regressions are conducted using the two-step system generalized method of moments (GMM) technique, and then verified by the least squares dummy variable corrected (LSDVC) estimator. The research result suggests that bank earnings opacity is less severe in periods of higher uncertainty. This implies that banks in a competitive markets need to reduce information asymmetry and more transparent in uncertainty.

Independent directors’ status and R&D: a study based on Chinese cultural background

PurposeIndependent directors are important corporate decision participants and makers. Based on the Chinese cultural background, this paper interprets the listing order of independent directors as independent directors’ status, exploring their influence on the corporate research and development (R&D) behavior.Design/methodology/approachThis paper studies A-share listed firms in China from 2008 to 2018 as the sample. The main method is ordinary least square (OLS) regression. We also use other methods to deal with endogenous problems, such as the firm fixed effect method, change model method, two-stage instrumental variable method, and Heckman two-stage method.Findings(1) Higher independent directors’ status attribute to more effective exertion of supervision and consultation function, and positively enhance the corporate R&D investment. The increase of the independent director’ status by one standard deviation will increase the R&D investment by 4.6%. (2) The above effect is more influential in firms with stronger traditional culture atmosphere, higher information opacity and higher performance volatility. (3) High-status independent directors promote R&D investment by improving the scientificity of R&D evaluation and reducing information asymmetry. (4) The enhancing effect of independent director’ status on R&D investment is positively associated with the firm’s patent output and market value.Originality/valueThis paper contributes to understanding the relationship between the independent directors’ status and their duty execution from an embedded cultural background perspective. The findings of the study enlighten the improvement of corporate governance efficiency and the healthy development of the capital market.

The Stock Pledge business of Listed Companies in China: An Empirical Analysis

This paper provides a comparative analysis of on-site and off-site pledge financing of listed company shares in China. The study aims to help shareholders and lenders reduce information asymmetry and identify transaction risks. The analysis focuses on the differences between the two models in terms of definition, transaction structure, operating process, transaction elements, lending speed, and funding sources. By comparing these aspects, the study enables the loan party to assess transaction risks before lending and allows lenders to choose the appropriate trading model based on their conditions and preferences. Ultimately, the research aims to increase the success rate of financing lending and improve the lender’s recovery of the principal and interest. Understanding the differences between on-site and off-site pledge financing can assist shareholders and lenders in making informed decisions and potentially reducing unnecessary losses.

Too costly to make a difference: An examination on the relationship between online financing and economic growth

AbstractWhile facilitating people's access to finance and promoting financial coverage, online financing activities involve high capital costs that suppress economic growth. Using 282 Chinese cities during 2011–2020 as the sample, we examine the relationship between online financing and economic growth. Exploiting a variety of models, we find that online financing activities do not have significant effects on economic growth. Further evidence shows that the insignificant relationship between online financing and economic growth also exists in cities with less developed formal financial systems. Our analysis based on the context where borrowers and lenders do not know each other offline implies that the technology intended to promote financial coverage, if not reducing information asymmetry and hence the cost incurred in financial transactions, does not necessarily lead to desirable economic and social outcomes.

The effect of IFRS adoption on bank internationalisation

AbstractBanking is one of the highly regulated industries, where a single set of global standards is likely to play a significant role in eliminating double reporting and reducing information asymmetry. Accordingly, we use data on 98 countries over 9 years to examine whether the use of International Financial Reporting Standard (IFRS) drives bank internationalisation. The results show that the use of IFRS is positively and significantly associated with an increase in foreign investment in the banking sector by easing regulatory compliance. However, in developing countries, the benefit of IFRS increasing foreign investment banks is associated with both easing regulatory compliance and reducing information asymmetry between banks and their clients. Our results are consistent across different sub‐samplings, including EU versus non‐EU, high versus low absence, and divergence between domestic standard and IFRS. These results provide reassurance and clear evidence of how IFRS facilitates the global flow of capital, even in a highly regulated industry such as banks. The results are robust to alternative measurements of variables and endogeneity tests using the Two‐Stage Least Square, Two‐step System Generalised Method of Moments and Propensity Score Matching.

Mediating agricultural entrepreneurship through embracing innovative technology: a tale from small rural enterprises in an emerging economy

PurposeThe study evaluates small marginal farmers’ (SMFs) potential behavior, attitude and trust in the adoption of innovative emerging technologies.Design/methodology/approachThe study employed an agile multi-factor approach to conceptualize a digital marketplace to connect a supply chain ecosystem for stakeholders.FindingsThe empirical findings suggest that most SMFs are willing to embrace innovative technologies. Nonetheless, they lack the necessary technological oriented education, training and funds to innovate. However, their reluctance to adapt changes is attributable to their fear of losing past customs and practices; they were threatened by the reaction of intermediaries (arthyias) to the adoption of technologies, which could result in them suffering huge losses.Originality/valueThis innovative disintermediation business model has a significant potential to reduce information asymmetry, cost and hoarding – and can thus increase the SMFs’ profit margins. Agricultural technological innovations have a profound potential to impact their supply chain logistics positively by reducing the wastage of perishable food and thus enhancing the consumer experience.

The Impact of Mandatory IFRS Adoption on the Value Relevance of Published Accounting Information: Evidence from Iraqi Private Banks

The study aimed to identify the impact of the International Financial Reporting Standards (IFRS) on the value Relevance of accounting information in a sample of banks listed on the Iraq Stock Exchange. The study dealt with the method of analyzing the information content of the annual financial statements published on the Iraq Stock Exchange website, which number (46). Banks. (15) Banks were chosen as a sample for the study for the period (2012-2021). This sample was determined according to two basic conditions: the availability of financial statements for the year 2021 and the banks’ continuation of disclosing their data for the specified years without interruption. The independent variable was measured by financial reporting standards. The international standard (IFRS) was set at a value of (1.0), and the second variable (value Relevance) was measured using the model (Ohlson, 1995). Data analysis was also conducted through the use of statistical methods and tools and the statistical program (stata), and the study concluded that there is a relationship there is a positive moral significance between the application of International Financial Reporting Standards (IFRS) and the value Relevance of published accounting information. This means that the greater the trend towards adopting international financial reporting standards is accompanied by an increase in the levels of value Relevance of accounting information. The study recommended the necessity the Central Bank of Iraq obligates banks listed on the Iraqi Stock Exchange to comply with the requirements of international financial reporting standards, which in turn reduces information asymmetry by disclosing Relevance accounting information to current and prospective investors.

Stock buybacks in the spotlight

Theoretical Basis The theoretical basis for the case is information asymmetry and signaling theory, with buybacks providing a mechanism for reducing information asymmetry between management and investors. The controversy surrounding buybacks has led to political and regulatory scrutiny, which, consistent with evidence from academic research, may affect corporate behavior. Research methodology The compact case is based on secondary, public information about stock buybacks. All sources used are cited in-text, with full citations included in the references section at the end of the teaching note. Case Overview/Synopsis Stock buybacks, a means of providing returns to shareholders, have recently received increased scrutiny by politicians, media and shareholder activists. Proponents have argued that buybacks result in efficient allocation of capital by returning funds to shareholders, whereas opponents have criticized buybacks for enriching executives, providing tax advantages to shareholders and contributing to income inequality. Corporations did not curtail their use of buybacks after the Inflation Reduction Act of 2022 imposed an excise tax. The case frames the buyback debate in current events and focuses on the buyback activity of Apple. The case provides students the opportunity to analyze alternative ways that companies can provide returns to shareholders, evaluate impacts of buybacks on corporate stakeholders and appraise the reasons for, and implications of, current controversy regarding buybacks. Complexity/Academic Level This compact case is appropriate for upper-level undergraduate or graduate courses in financial accounting, tax and finance. This case provides an opportunity to analyze and evaluate stock buyback decisions in the context of the current controversy related to buybacks.

Information and Bargaining through Agents: Experimental Evidence from Mexico’s Labour Courts

Abstract Well-functioning courts are essential for the health of both financial and real economies. Courts function poorly in most lower-income countries, but the root causes of poor performance are not well understood. We use field experiments with ongoing cases to analyse sources of dysfunction in Mexico’s largest labour court. We provide parties with personalized predictions for case outcomes and show that this information nearly doubles settlement rates and reduces average case duration. The experiment generates the first experimental evidence in live court cases that reducing information asymmetries results in a decrease in delay, an outcome predicted by many theories of bargaining. We also find that the information treatment is effective only when the plaintiff is present to receive it directly, suggesting agency issues between plaintiffs and their private lawyers. For most workers, the treatment appears to improve welfare, as measured by discounted payouts and ability to pay bills.

Updated Theory and New Evidence on the Effect of Information System Precision on Managerial Reporting

ABSTRACT Information asymmetry is fundamental to participative budgeting. Hannan, Rankin, and Towry (2006, “HRT”) develop a nuanced theory regarding the effect of information asymmetry on slack. The authors provide evidence that suggests increasing the precision of a superior’s information system, thereby reducing information asymmetry, can increase slack. We develop a refined version of HRT’s theory by incorporating evidence of how nonpecuniary incentives affect subordinates’ reporting slack from research subsequent to HRT. Our updated theory predicts that slack decreases as information system precision increases, opposite to the results in HRT. To test our refined theory, we replicate HRT’s experiment and find results consistent with our theory. Our results support HRT’s general theory but highlight the importance of establishing regularities of how nonpecuniary incentives affect behavior in accounting. Specifically, our updated theory and new evidence suggest that improving information system precision decreases budgetary slack, contrary to the results suggested in HRT. Data Availability: Data are available from the authors upon request. JEL Classifications: D82; M41; M52.

Enhancing trust in global supply chains: Conceptualizing Digital Product Passports for a low-carbon hydrogen market

Industries and energy markets around the world are facing mounting pressure to decarbonize, prompting them to transform processes and supply chains towards sustainability. However, a lack of credible sustainability data proves to be a considerable barrier for emerging markets for sustainable products: Against the background of complex and globalized supply chains, it is necessary to verify the sustainability claim of products in order to demand price premiums for sustainable products in the long run. To enable this, it is necessary that stakeholders in globalized supply chains are willing to share relevant data along the entire supply chain for increasing traceability and reducing information asymmetries. Using the example of international hydrogen supply chains, we study how data can be shared between different stakeholders using Digital Product Passports while addressing stakeholders’ concerns about data privacy and disclosure. In our work, we develop design principles that provide insight into how a Digital Product Passport should be designed to verify the hydrogen’s carbon footprint in a reliable way and to ensure the willingness of stakeholders to share their data. We follow a multi-step approach with a structured literature review followed by expert interviews and qualitative content analysis for a synthesis of design principles. Our research illustrates that a Digital Product Passport must collect data comprehensively and automatically, process it in a decentralized and tamper-proof manner, protect privacy and sovereignty of stakeholders, and ensure interoperability.

Curbing myopic R&D behavior: How private meetings serve as a channel

This study considers whether investor-manager private meetings serve as a potential channel to detect and restrain corporate myopic R&D behavior in firms subject to earnings pressure. To do so, we exploit a unique dataset of corporate site visits, a particular form of private meetings. Our results indicate that the myopic R&D behavior of firms under earnings pressure is significantly lower when the firm hosts more institutional investors’ site visits. To further tease out the underlying mechanisms, we conduct cross-sectional analyses and find that the constraining effect of site visits is greater when there is more need for monitoring by institutional investors, i.e., when the information environment is weak and product market competition is low. Further, this monitoring effect is stronger when more questions are asked about R&D during the site visit, when the site visit involves more than one institutional investor, and when the site visit occurs earlier in the fiscal year. The main findings are robust to alternative model specifications, estimation approaches, and endogeneity issues. Overall, our evidence suggests that site visits cannot only reduce information asymmetry, but they have an important monitoring role as well.