Reduce Information Asymmetry Research Articles

How Does ESG Ratings Influence IPO’s Underpricing? Evidence from the US Market

Purpose: The purpose of this paper is to analyse the impact of ESG ratings on IPOs performance in the form of underpricing. It is also analysed whether the existence of neutral or positive ESG ratings has an impact on underpricing. In addition, it will also be analysed whether the degree of ESG rating influences the underpricing within the rated companies. The aim is to make a contribution that can lead to a further reduction in information asymmetries on the capital markets and analyse the effects of signals. Design/Methodology/Approach: The RepRisk rating of approx. 360 sub-frames is used to determine the influence of these variables on the underpricing with the help of a linear regression. Control variables are used to consider influencing factors that have already been researched. The influence of these variables on underpricing is then determined in a linear regression analysis. Statistical robustness tests validate the results. Findings: An all-encompassing statement on the question of whether ESG ratings as part of the IPO process can lead to a reduction of information asymmetries or be a qualitative signal regarding the Signaling Theory. Originality/Value: This paper provides new and important insights into the relationship between ESG ratings and the underpricing phenomenon. It is intended to support existing theories. JEL Classification G11, Q56

Statutory ESG reporting and investment efficiency: evidence using quasi-natural experiment

Purpose This paper aims to examine the effect of compulsory environmental, social and governance (ESG) disclosure regulation on corporate investment efficiency (IE). The study also explains how carbon sensitivity moderates the ESG-IE nexus. Design/methodology/approach The present study is based on the well-developed difference-in-differences (DID) research design with firms required to file ESG reports as the treatment group and others as a control group. Companies listed on the National Stock Exchange have been considered as the source of the sample and the final dataset of 1,077 firms (9,149 firm-year observations from 2011 to 2020) has been selected using a multi-stage sampling approach. The study also performs several robustness tests to validate the reliability of the results. Findings Based on empirical results, the study concludes that the implementation of compulsory ESG reporting improves the investment efficiency of treated firms in the post-enforcement period. Further, the study also confirms that firms in the carbon-sensitive industry have experienced a high level of improvement in investment efficiency. Research limitations/implications As the study supports the value relevance of mandatory ESG disclosure, managers can utilize the same to communicate superior firm performance and reduce information asymmetry. Further, this study empirically validates the outcome of a regulatory policy which in turn assists policymakers in smooth implementation. Originality/value The extant literature has primarily analysed voluntary ESG reporting framework and that too in the setting of developed nations. However, as against developed economies, emerging countries have scanty regulations for ESG reporting and that too perforated with gaps. Such a constrained legal environment amplifies the information asymmetry among investors and managers leading to investment inefficiency. Thus, the current research deepens the extant literature by studying mandatory ESG reporting within an emerging economy to better understand the ESG-IE nexus.

The impact of IFRS adoption on the relevance of financial reporting in emerging markets: the case of Moroccan listed companies

PurposeThis study aims to assess the impact of the introduction of International Financial Reporting Standards (IFRS) on the informational relevance of accounting figures for Moroccan companies listed on the Casablanca Stock Exchange. Specifically, it seeks to determine whether IFRS adoption improves the ability of accounting data to reflect share price movements.Design/methodology/approachThe empirical analysis covers a sample of 27 Moroccan listed companies over a six-year period (2015–2020), with a total of 162 observations. The study tests various hypotheses through association studies to evaluate the effectiveness of accounting figures in reflecting share prices in the pre-IFRS and post-IFRS periods. The analysis utilizes Ohlson's (1995) price model, which is widely used in the literature for such assessments.FindingsThe results show that both earnings and shareholders’ equity are more effective in explaining share price variations in the post-IFRS period than in the pre-IFRS period. In particular, equity demonstrates greater explanatory power than earnings. The combined explanatory power of equity and earnings is significantly stronger in the post-IFRS period, suggesting that the adoption of IFRS has played a key role in enhancing the quality of financial information disclosed in the Moroccan market.Practical implicationsTheoretical implications – this study highlights that the adoption of IFRS reduces information asymmetry, thereby mitigating conflicts of interest and agency costs. By aligning accounting practices with international standards, IFRS enhance transparency and governance, fostering a more reliable business environment. Practical implications – the study indicates that IFRS adoption improves the transparency, reliability and comparability of financial information, enhancing investor confidence and making the Moroccan financial market more attractive. It provides useful guidance for regulators, businesses and countries considering IFRS implementation, demonstrating the importance of these standards in boosting market transparency and attracting global investments.Originality/valueThis study explores the impact of IFRS adoption on the relevance of financial information in Morocco, a topic that has been underexplored in emerging economies. It fills a gap in the literature by providing insights into IFRS adoption in a specific context, thus contributing to the ongoing debate on their effectiveness in developing economies.

Social responsibility and corporate borrowing

We study the impact of social capital, measured by corporate social responsibility (CSR) performance, on corporate borrowing. Using a sample of 120,204 bank loan applications of China's listed firms, we find that an increase in CSR performance increases the loan amounts of approved loans, although it does not alter the likelihood of loan approval. Using aggregate loans at the firm level, we show that CSR performance positively impacts firms' long-term borrowing from banks but does not affect their short-term borrowing. The economic magnitude of the positive effect is large at both the loan and firm levels. We attribute this positive relationship to reduced information asymmetry and improved risk mitigation. Surprisingly, we find that banks do not discipline their borrowers' CSR investments through the lending relationship. Specifically, when borrowers exhibit high CSR performance and borrow from banks with high CSR performance, further increases in CSR no longer correlate with larger loan amounts. Our findings suggest that China's state-led green credit policies should be more market-oriented.

Is digital-green synergy the future of carbon emission performance?

Amid the new industrial revolution, digital technology and green finance play pivotal roles in shifting towards a low-carbon economy. This paper establishes a coherent research framework by integrating digital technology, green financing, and carbon emission performance. Utilizing a multifaceted dataset that combines provincial panel data with corporate listings databases, this study evaluates the development of green finance using a hybrid weighing methodology that merges the analytical hierarchy process (AHP) with the spatial-temporal entropy weight method. This work empirically analyzes the effects and mechanisms through which these factors influence carbon emission performance, employing instrumental variables and models with two-way fixed effects. The results show that: (1) Green finance (green) and digital technology both have a significant and direct impact on enhancing carbon emission performance (cep). (2) The synergistic effect is particularly pronounced in the central and western regions, as well as in areas characterized by lenient environmental regulations and weaker commercial credit systems. (3) This synergy is primarily achieved through promoting industrial upgrades, alleviating financial mismatches, and reducing information asymmetry. The study also shows that synergy shapes threshold features in the positive effect of synergy on cep when combined with regulatory actions and economic growth. (4) While the digitalization of businesses may initially increase carbon emissions, the combined impact of digital technology and green effectively mitigates these increases and leads to a substantial reduction in emissions. These findings suggest designing policy initiatives that are both unique and flexible, and increasing the extent and complexity of the integration between digital technology and green. The outcomes of this study offer significant guidance for policy development and industry practices.

Gender Diversity and Economic Efficiency: Reducing Information Asymmetry through Women on Boards

Gender Diversity and Economic Efficiency: Reducing Information Asymmetry through Women on Boards

Visual annual reports and stock price crash risk

AbstractUsing a sample of Chinese A‐Share listed companies during 2018–2023, we explore the influence of visual annual reports (VARs) on stock price crash risk. The results suggest that VARs are negatively associated with crash risk, and several robustness and endogeneity examinations validate our primary findings. Mechanism analyses reveal that reduced information asymmetry and increased internal control quality may serve as potential pathways through which VARs influence crash risk. Additionally, cross‐sectional examinations suggest that the negative relation between VARs and crash risk is more pronounced for companies with poor annual report readability and limited external monitoring.

The Impact of ESG Disclosure on Financial Performance in Oil and Gas Companies: A Difference-in-Differences Analysis

With increasing global attention on sustainable development and corporate social responsibility, more and more countries and regions are requiring companies to disclose information related to environmental, social, and corporate governance (ESG). Especially in the oil and gas industry, ESG information disclosure has become an important means of measuring corporate governance and sustainable development performance. However, there is still controversy in both academic and practical circles regarding whether ESG disclosure can improve financial performance and its impact on companies fulfilling their fiduciary responsibilities. Therefore, this study aims to explore the impact of ESG disclosure on the financial performance of companies in the oil and gas industry, and analyze its relationship with the fulfillment of trust responsibilities.This study adopts the Difference in Differences (DID) method and selects oil and gas companies affected by ESG disclosure policies as research objects. By comparing the changes in financial performance of these companies before and after policy implementation, the role of ESG information disclosure in improving company transparency and reducing information asymmetry is analyzed. In addition, this study also explored the interactive relationship between ESG disclosure and trust responsibility under different legal frameworks, especially in the application of high environmental risk industries. The research results indicate that active ESG disclosure not only helps improve the long-term financial stability of companies, but also enhances shareholder trust and reduces legal risks, especially in regions with sound policies where the effect is more significant. However, research has also found that ESG disclosure may increase short-term costs and conflict with short-term financial goals in trust obligations.

Research on the Improvement Path of Financing Constraints for Small and Medium-Sized Enterprises Empowered by Digital Transformation

This paper, based on literature related to big data and corporate financing, analyzes and explores the mechanisms and effects of big data technology in alleviating corporate financing constraints. As is known to all, Financing constraints have always been an important factor restricting the development of small and medium-sized enterprises, and digital transformation provides new ideas to alleviate this problem. The current situation of financing constraints is apparently complex and diverse, which is involving multiple aspects such as information asymmetry, limited financing channels, high financing costs, policy and market environment, as well as enterprise ownership and industrial structure.It argues that big data technology, with its powerful data processing and analytical capabilities, effectively reduces information asymmetry, broadens financing channels for enterprises, and significantly lowers the costs of debt and equity financing, thereby alleviating corporate financing constraints. Digital transformation not only enhances the profitability and sustainability of small and medium-sized enterprises but also strengthens investor confidence by improving market transparency and risk management capabilities, providing strong support for corporate financing.

The role of audit committee characteristics in improving the risk disclosure of companies examining the moderating role of audit quality

This paper examines the association between audit committee characteristics (ACC) and risk disclosure (RD) of firms, focusing on the moderating effect of audit quality (AQ). The importance of RD to investors and stakeholders is that such a practice offers a better evaluation of the overall risk profile of companies. Based on agency theory complemented by the resource dependence theory, this paper therefore suggests that effective audit committees have an effect of reducing information asymmetry while increasing audit quality monitoring capacities and consequently enhance risk disclosure practices. In this respect, the literature sources were reviewed, and a hypothetical framework was developed to test the hypotheses. The sample selection comprises 54 companies with non-financial companies listed in the Egyptian Exchange Market, EGX100, for the period 2018 to 2021, which amounts to 216 observations. According to the results, ACC, such as size and financial expertise, are significant for RD, while ACC relating to meetings and independence are less important for RD. The study further established that AQ moderates the relationship between ACC and RD, implying that the significant influence of ACC is stronger when AQ is high. These inferences are of essence to policy makers and companies in understanding the implication of ACC on RD and the relation to high-quality audits in improving the effectiveness of audit committees. It underlines the importance of audit committees in giving assurance about transparency and accountability in financial reporting.

Analysis of Internal Controls, Individual Morality and Information Asymmetry Against Fraud Tendencies At PT. Ambassador Mayanksari in Surabaya

This study aims to examine the influence of internal control, individual morality, and information asymmetry on the tendency of fraud in PT. Ambassador Mayanksari located in Surabaya. Fraud is a serious problem because it can harm a company both financially and reputationally. In this study, a quantitative approach was used with a survey method involving 57 respondents, who were employees of PT. Ambassador Mayanksari. The collected data was analyzed using multiple linear regression techniques to identify the relationship between independent and dependent variables. The findings show that all three variables—internal control, individual morality, and information asymmetry—together exert a significant influence on fraud propensity. Separately, internal control has been proven to have a positive influence on fraud tendencies. The same is true for individual morality and information asymmetry, both of which have a significant impact on the occurrence of fraud. This study suggests that the implementation of good internal control, the improvement of individual morality, and the reduction of information asymmetry can play an important role in reducing the potential for fraud in companies.

The Impact of Complex Estimates of IFRS-9 on The Proportion of Key Audit Matters (KAM) Disclosures: Evidence from Jordanian Capital Market

This study seeks to provide fresh empirical evidence on the way complex IFRS-9 estimations affect Key Audit Matters (KAM) disclosure in Jordan, an impoverished nation. A robust year-industry fixed-effects OLS regression model has been employed to test the developed hypotheses over the period from 2017 to 2022. The investigation showed a substantial statistical relationship between each IFRS-9 complex estimate category (proxied by financial assets held for trade, sale, or maturity) and KAM proportions. The results concurred with nations that IFRS-9 caused capital market uncertainty. To reduce information asymmetry, auditors provide a large number of KAM in their reports to evaluate and appraise complicated estimations. This research may be utilised to set a financial reporting and disclosure policy for unfavourable scenarios. This study updates policymakers and standard-setters on the impact of ISA-701's KAM disclosure requirement. KAM research is helpful for evaluating confidence interval disclosures, external audits, and KAM disclosures' utility following IFRS implementation. Thus, regulatory agencies, standard-setters, stakeholders, and audit report consumers interested in KAM disclosures and ISA-701 implementation in developing nations could gain from this research. The findings may motivate academia to use similar data to other emerging nations to better understand how reporting KAMs influences audit methods. To author knowledge, this is one of the first empirical research to examine the influence of post-IFRS-9 audit processes and the first to refer to its correlation with KAM disclosures. This study is the first to evidence on the impact of IFRS-complex estimations on KAM proportions. How auditors handle investor protection after IFRS introduction and its extended reporting obligations in underdeveloped economies have received little attention. This study examines audit activity under a weak legal framework, unlike other auditing studies, which are highly regulated.

Financial Communication in Crisis Situations

Financial communication plays a key role in shaping stakeholders' decision-making processes, acquiring even greater importance in today's turbulent global landscape marked by various overlapping crises. Thus, the aim of the research revolves around a theoretical exploration, supported by a bibliometric analysis, to emphasize the intrinsic importance of financial communication. The research methodology is based on a bibliometric analysis of 3,000 scientific papers indexed in the Web of Science database, from 1975 to 2023, focusing on financial communication. To facilitate this analysis, specialized software tools for data processing and bibliometric exploration, namely VOSviewer and Bibliometrix, were used. The research findings underline the complexity and interdependence of the financial communication process in organizations, highlighting its evolution from transparency and reduction of information asymmetry in periods of stability, to the need for rapid adoption of digital technologies and integration of ESG dimensions during recent crises, all of which are essential to meet stakeholders' demands and maintain investors' trust.

Gender diversity on boards and earnings forecast accuracy: insights from India

PurposeThis paper explores the relationship between gender diversity on corporate boards and the accuracy of analysts’ earnings forecasts. The study focuses on gender-diverse boards as effective monitors, which are expected to influence corporate disclosures, reducing information asymmetry positively and improving forecast accuracy. The unique context of India’s gender quota policy on corporate boards and its relatively weak corporate governance structure offers an ideal setting to investigate this relationship.Design/methodology/approachThe study utilises the generalised method of moments dynamic panel regression to address this research objective, analysing data from 217 Indian firms listed on the National Stock Exchange from 2014 to 2019.FindingsThe findings reveal that greater gender diversity on corporate boards positively impacts forecast accuracy. Specifically, having more women directors on the board enhances forecast accuracy, with a critical mass of women directors (more than one woman) further amplifying this effect. The study also shows that independent women directors significantly improve forecast accuracy, whereas grey women directors (those with family connections or non-independent roles) negatively affect it.Originality/valueThis study contributes significantly in two key aspects. Firstly, it sheds light on the value of women directors on boards in a country where women’s representation is mandated. Secondly, the research highlights the crucial role of independent women directors in ensuring robust financial oversight, particularly in an emerging economy.

Pengaruh Pengendalian Internal dan Financial Distress terhadap Konservatisme Akuntansi

Financial statements are a description of the company's condition within a certain period of time. One of the principles that can be used to prepare financial statements is the principle of conservatism. The use of accounting conservatism in preparing financial statements can reduce information asymmetry in a company. This study aims to determine how the effect of internal control and financial distress on accounting conservatism. This study used 163 samples of manufacturing companies listed on the Indonesia Stock Exchange from 2017 to 2021. The results showed that internal control has no effect on accounting conservatism, while financial distress has a negative effect on accounting conservatism. This research is expected to increase knowledge on the topic of accounting conservatism in manufacturing companies in Indonesia. Suggestions for further research are expected to add other variables that may affect accounting conservatism.

Unveiling the Mechanisms of Digital Technology in Driving Farmers' Green Production Transformation: Evidence from China's Watermelon and Muskmelon Sector.

Leveraging the transformative potential of digital technologies to support the farmers' green production transformation (FGPT) is a critical catalyst for facilitating the accelerated green transformation and upgrading of agricultural systems, thereby achieving high-quality agricultural development. Using survey data from major watermelon- and muskmelon-producing regions in Henan, Shandong, and Xinjiang, and employing Ordinary Least Squares (OLS), Propensity Score Matching (PSM), and the Logit model, this study examines the mechanisms through which digital technology influences FGPT. The findings reveal that the adoption of digital technology significantly reduces farmers' use of pesticides and fertilizers, with a particularly pronounced effect on pesticide reduction. Heterogeneity analysis indicates that the impact of digital technology on reducing pesticide and fertilizer usage varies across regions: while its adoption leads to significant reductions in Henan and Shandong, the positive effects in Xinjiang remain statistically insignificant. Mechanism analysis shows that digital technology enhances FGPT by reducing information asymmetry, improving market access, and enhancing precision management practices. Based on these findings, this study recommends expanding awareness campaigns to accelerate the adoption of digital technology, enhancing digital infrastructure to bridge the urban-rural digital divide, and optimizing digital technology promotion systems. These actions can be taken alongside the implementation of economic incentives and compensation mechanisms. The insights and policy recommendations from this research provide valuable guidance for China and other countries seeking to leverage digital technology for sustainable agricultural development.

Blockchain-based food traceability system and pro-environmental consumption: A moderated mediation model of technology anxiety and trust in organic food product

Blockchain technology is increasingly recognized as a transformative tool for enhancing clarity and responsibility in the organic food supply chain, where concerns about product authenticity and safety are paramount. By offering provable and translucent information about the origination, production processes, and administration of organic items, blockchain helps to reduce information asymmetry and builds consumer trust, which is critical for purchase decisions in the organic food market. Drawing on insights from the trust theory and the stimulus-organism-response framework, this study uses a moderated mediation model to explore how technology anxiety negatively moderates the direct and indirect influences of blockchain-based food traceability systems on trust in organic food products and organic food purchase intention. Using a targeted sample of 5326 consumers in Vietnam, the PROCESS macro approach (models 8 and 4) is utilized to examine the formulated hypotheses. The results demonstrate that blockchain-based food traceability systems notably enhance consumer trust in organic food products and their intention to buy these products. Trust in organic food products serves as a mediator in the connection between blockchain-based traceability and purchase intention, while technology anxiety weakens the positive impacts of blockchain technology on trust and purchase intention when anxiety levels are high. This research makes crucial contributions to the literature by offering a mechanism-based explanation of how blockchain technology enhances consumer trust in organic food products and integrates technological anxiety as a moderator, providing a deeper understanding of how technological innovations shape consumer behavior. In light of the findings, several critical recommendations have been proposed for practitioners and policymakers.

Blockchain Technology and Quality of Accounting Information: A Systematic Literature Review

The purpose of this study is to examine the scholarly literature regarding the impact of blockchain technology on the quality of accounting information. ⁠The research methodology is a bibliometrically mapped Systematic Literature Review (SLR) comprising 36 reputable resources. The findings demonstrate numerous advantages of blockchain technology, particularly for accountants. One of the important advantages is distributed recordkeeping, which enhances information transparency and reduces information asymmetry. As a result, it significantly improves the quality of accounting information. ⁠The implication of this research is to provide comprehensive insights into the potential paradigm shift in accounting facilitated by blockchain adoption. Furthermore, the study serves as a foundational platform for future research on the implementation and impact of blockchain in accounting information quality.

Platformization of Taxi-Hailing Services: Reducing Information Asymmetry by Examining Consumer Preferences from the Cognitive Fit Perspective

This study explores the role of mobility platforms in mitigating issues arising from information asymmetry about taxi services in South Korea. We employed conjoint analysis from a cognitive fit perspective and analyzed the marginal utilities of platform features using a mixed logit model. Our results show that platformization addresses negative experiences associated with information asymmetry and resolves long-standing problems associated with taxi services. Specifically, consumers prioritize information visualization and safety services, underscoring the platforms’ role in enhancing trust and safety as well as convenience. Despite the expansion into premium mobility experiences, the fundamental expectation from consumers remains access to reliable, safe services. This research contributes to understanding the impact of digital transformation on the mobility sector, emphasizing the need for strategic and policy interventions to leverage mobility platforms for improved service delivery.

Enhancing the Public-Private-Community Partnerships in the Banana Value Chain in Mutasa District, Zimbabwe

The paradigm shift from the New Public Administration to the New Public Governance underlines the significance of multi-stakeholder collaborations in attending to complex societal challenges. In this vein, Public-Private-Community Partnerships are a feasible mechanism for enhancing the banana value chain in Mutasa District of Zimbabwe. Bananas are extensively eaten fruits in the world with smallholder farmers playing a vital role in production, particularly in developing nations like Zimbabwe. Yet smallholder farmers’ economic returns in the banana value chain are a cause of concern. Thus, this study focuses on enhancing Public-Private-Community Partnerships in the smallholder banana value chain. A concurrent mixed methods research design allowed for both objectivity and detailed analysis. The target population comprised public, private, and community stakeholders in the banana value chain. The multiplicity of stakeholders motivated a mixture of quota, purposive, and snowball sampling techniques to ensure representation. Questionnaires, in-depth interviews, and focus group discussions were the data collection methods. There was descriptive analysis of quantitative data, while qualitative data were analyzed thematically, and related findings were grouped together. Public-Private-Community Partnerships are attractive because they reduce information asymmetry, enhance transparency, ensure fairness in pricing, facilitate risk sharing, increase productivity, and enhance value addition. Public-Private-Community Partnerships are not “magic bullets”, necessitating attention to their potential deficits, which include power imbalances, conflicts of interest among partners, and challenges associated with ensuring active participation by diverse stakeholder groups. Pathways for strengthening Public-Private-Community Partnerships include consensus building, clear definition of partners’ roles, fair sharing of risks and benefits, monitoring and evaluation, selection of competent actors, and farmer capacity building. Effective Public-Private-Community Partnerships facilitate active participation among the public, private, and community actors along the entire value chain.