Investor Competition Over Information and the Pricing of Information Asymmetry
By Brian Akins, Jeffrey Ng, Rodrigo S. Verdi. 2011
190 citations recorded by the source corpus.
ABSTRACT: Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. Relying on theories about competition between informed investors as well as the pricing of information asymmetry, we hypothesize a cross-sectional variation in the pricing of information asymmetry that is conditional on competition. We develop and validate empirical proxies for competition using the number and concentration of institutional investor ownership. Using these proxies, we find a lower pricing of information asymmetry when there is more competition. Overall, our results suggest that competition between informed investors has an important effect on how the information environment affects the cost of capital. JEL Classifications: G12; G14.
View Paper: https://www.semanticscholar.org/paper/89023905d2e23ce4990bfd54aa7360fb316da424
Citations in the corpus
- Financial statement comparability and credit risk (2013, unknown): “Armstrong et al. (2011) use number of investors in a firm as a proxy for the degree of competition in the firm’s equity, and they find that information asymmetry is priced only when the degree of competition is low.”
- Does Earnings Quality Affect Information Asymmetry? Evidence from Trading Costs*: Earnings Quality and Information Asymmetry (2013, unknown): “22 Two recent studies, Akins et al. (2011) and Armstrong et al.”
- Financial Statement Comparability and Expected Crash Risk (2016, unknown): “(2002) to proxy for the quality of a firm's information environment, consistent with prior studies (e.g., Brown et al., 2004, 2009; Akins et al., 2012; Bhattacharya et al., 2012).”
- Guiding Through the Fog: Financial Statement Complexity and Voluntary Disclosure (2016, unknown): “22 (e.g., Lehavy et al., 2011; Akins et al., 2012), average (median) analyst coverage is 4.”
- The effect of information quality on liquidity risk (2011, unknown): “My paper contributes to the broader objective of improving our understanding of the mechanisms that underlie the relation between information quality and cost of capital (e.g., Botosan, 1997; Francis et al., 2004, 2005; Core, Guay, and Verdi, 2008; Akins, Ng, and Verdi, 2011).”