IDEAS home Printed from https://ideas.repec.org/a/jes/wpaper/y2013v5i2p254-266.html
   My bibliography  Save this article

The Issue Of Asymmetric Information Upon The Capital Market

Author

Listed:
  • Olga Plesco

    (Faculty of Economics and Business Administration within Alexandru Ioan Cuza University of Iasi, Romania)

  • Ludmila Sobol

    (Faculty of Economics and Business Administration within Alexandru Ioan Cuza University of Iasi, Romania)

Abstract

The capital market has an important role at the micro and macro economical level, having the capacity to mobilize resources and to place them in a productive manner. The relation between accounting and capital market started to be analyzed from the middle of XXth century, when the investors started to ask more details about the companies’ activity and not just general accounting values. The certainty is nowadays a part of the cost of information which is consciously assumed by the users differently in pre-crisis and crisis time. Informational asymmetry plays a double role through the participants on the capital market: positive one for those who use the lack of information of others with economic responsibility and negative when information holders use them to affect the other participants or users. This paper seeks to examine the impact of financial information on the level of the capital value of the companies in order to evaluate the influence and to establish the measures that must be applied to reduce the asymmetries between different users of that information.

Suggested Citation

  • Olga Plesco & Ludmila Sobol, 2013. "The Issue Of Asymmetric Information Upon The Capital Market," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5(2), pages 254-266.
    • Handle: RePEc:jes:wpaper:y:2013:v:5:i:2:p:254-266
    as

    Download full text from publisher

    File URL: http://www.ceswp.uaic.ro/articles/CESWP2013_V2_PLE.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francis, Jennifer & LaFond, Ryan & Olsson, Per & Schipper, Katherine, 2005. "The market pricing of accruals quality," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 295-327, June.
    2. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    3. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, May.
    4. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    5. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    6. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 467-498, June.
    7. Leuz, C & Verrecchia, RE, 2000. "The economic consequences of increased disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 38, pages 91-124.
    8. Merton, Robert C, 1987. "A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
    9. Christopher S. Armstrong & John E. Core & Daniel J. Taylor & Robert E. Verrecchia, 2011. "When Does Information Asymmetry Affect the Cost of Capital?," Journal of Accounting Research, Wiley Blackwell, vol. 49(1), pages 1-40, March.
    10. Richard A. Lambert & Christian Leuz & Robert E. Verrecchia, 2011. "Information Asymmetry, Information Precision, and the Cost of Capital," Review of Finance, European Finance Association, vol. 16(1), pages 1-29.
    11. Diamond, Douglas W & Verrecchia, Robert E, 1991. "Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-1359, September.
    12. repec:bla:jfinan:v:59:y:2004:i:4:p:1553-1583 is not listed on IDEAS
    13. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    14. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    15. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. De George, Emmanuel T. & Li, Xi & Shivakumar, Lakshmanan, 2016. "A review of the IFRS adoption literature," LSE Research Online Documents on Economics 67599, London School of Economics and Political Science, LSE Library.
    2. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    3. Emmanuel T. De George & Xi Li & Lakshmanan Shivakumar, 2016. "A review of the IFRS adoption literature," Review of Accounting Studies, Springer, vol. 21(3), pages 898-1004, September.
    4. Chauhan, Yogesh & Kumar, Surya B., 2018. "Do investors value the nonfinancial disclosure in emerging markets?," Emerging Markets Review, Elsevier, vol. 37(C), pages 32-46.
    5. Stolowy, Hervé & Jeanjean, Thomas & Erkens, Michael, 2011. "The economic consequences of increasing the international visibility of financial reports," HEC Research Papers Series 957, HEC Paris.
    6. Loukil, Nadia & Yousfi, Ouidad, 2010. "Firm's information environment and stock liquidity: evidence from Tunisian context," MPRA Paper 28699, University Library of Munich, Germany, revised Feb 2011.
    7. Andy Lardon & Marc Deloof, 2014. "Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext Free Market," Small Business Economics, Springer, vol. 42(2), pages 361-385, February.
    8. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    9. Bailey, Warren & Andrew Karolyi, G. & Salva, Carolina, 2006. "The economic consequences of increased disclosure: Evidence from international cross-listings," Journal of Financial Economics, Elsevier, vol. 81(1), pages 175-213, July.
    10. Tang, Vicki Wei, 2011. "Isolating the effect of disclosure on information risk," Journal of Accounting and Economics, Elsevier, vol. 52(1), pages 81-99, June.
    11. Jan Diebecker & Friedrich Sommer, 2017. "The impact of corporate sustainability performance on information asymmetry: the role of institutional differences," Review of Managerial Science, Springer, vol. 11(2), pages 471-517, March.
    12. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    13. Nikolaev, V. & van Lent, L.A.G.M., 2005. "The Endogeneity Bias in the Relation Between Cost-of-Debt Capital and Corporate Disclosure Policy," Discussion Paper 2005-67, Tilburg University, Center for Economic Research.
    14. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.
    15. Wijayana, Singgih & Gray, Sidney J., 2018. "Capital market consequences of cultural influences on earnings: The case of cross-listed firms in the U.S. stock market," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 134-147.
    16. Stephen Dempsey & David Harrison & Kimberly Luchtenberg & Michael Seiler, 2012. "Financial Opacity and Firm Performance: The Readability of REIT Annual Reports," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 450-470, August.
    17. Nikolaev, V. & van Lent, L.A.G.M., 2005. "The Endogeneity Bias in the Relation Between Cost-of-Debt Capital and Corporate Disclosure Policy," Other publications TiSEM 5960a342-0adc-4f85-bf87-2, Tilburg University, School of Economics and Management.
    18. Nikolaev, V. & van Lent, L.A.G.M., 2005. "The endogeneity bias in the relation between cost-of-debt capital and corporate disclosure policy," Other publications TiSEM 04869b30-e8a9-4ecf-84ae-6, Tilburg University, School of Economics and Management.
    19. Kung-Cheng Ho & Hung-Yi Huang & Shengnan Liu, 2022. "Information disclosure ratings and managerial short-termism: An empirical investigation of the Chinese stock market," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 349-381, March.
    20. Liangliang Jiang & Ross Levine & Chen Lin & Wensi Xie, 2022. "Deposit Supply and Bank Transparency," Management Science, INFORMS, vol. 68(5), pages 3834-3855, May.

    More about this item

    Keywords

    financial information; cost of capital; information asymmetry; performance; disclosure Romania;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jes:wpaper:y:2013:v:5:i:2:p:254-266. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alupului Ciprian (email available below). General contact details of provider: https://edirc.repec.org/data/csjesro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.