Asymmetric information, firm investment and stock prices
AbstractPurpose–The purpose of this paper is to explore the relations of investment and stock prices (Tobin-Q), the impact of asymmetric information on the investment sensitivity to stock price, and the impact of asymmetric information on the stock price sensitivity to investment. Design/methodology/approach–Research was conducted with 313 listed companies and 1,878 firm-year observations from Chinese stock market. Empirical studies were conducted based on two hypotheses by using R2, information delay and scores of information disclosure as measures of asymmetric information and taking changes in book assets and capital expenditures scaled by book assets as measures of investment. Findings–The key findings of the paper are: managers are learning from the market when they make investment decisions; the asymmetric information has a significant negative impact on the investment sensitivity to stock price; and the asymmetric information has a significant positive impact on the stock price sensitivity to investment. Practical implications–The paper has a significant practical implication for regulation policy making in stock market. Originality/value–The paper fills the research gap in two points. It studies the impact of asymmetric information on the investment sensitivity to stock price, and the impact of asymmetric information on the stock price sensitivity to investment in Chinese stock market for the first time.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal China Finance Review International.
Volume (Year): 1 (2010)
Issue (Month): 1 (December)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Malcolm Baker & Jeffrey Wurgler, 2002.
"Market Timing and Capital Structure,"
Journal of Finance,
American Finance Association, vol. 57(1), pages 1-32, 02.
- James Dow & Rohit Rahi, 1996.
"Informed Trading, Investment and Welfare,"
Archive Working Papers
029, Birkbeck, Department of Economics, Mathematics & Statistics.
- Andrei Shleifer & Robert W. Vishny, 1995.
"The Limits of Arbitrage,"
NBER Working Papers
5167, National Bureau of Economic Research, Inc.
- Andrei Shleifer ad Robert W. Vishny, 1995. "The Limits of Arbitrage," Harvard Institute of Economic Research Working Papers 1725, Harvard - Institute of Economic Research.
- Lawrence R. Glosten & Paul R. Milgrom, 1983.
"Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders,"
570, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
- Chan, Kalok & Hameed, Allaudeen, 2006. "Stock price synchronicity and analyst coverage in emerging markets," Journal of Financial Economics, Elsevier, vol. 80(1), pages 115-147, April.
- Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
- Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
- Lindenberg, Eric B & Ross, Stephen A, 1981. "Tobin's q Ratio and Industrial Organization," The Journal of Business, University of Chicago Press, vol. 54(1), pages 1-32, January.
- Loughran, Tim & Ritter, Jay R, 1995. " The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.