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Tuesday, August 4, 2020 | History

3 edition of Information asymmetry and equity issues found in the catalog.

Information asymmetry and equity issues

Nathalie Dierkens

Information asymmetry and equity issues

by Nathalie Dierkens

  • 142 Want to read
  • 9 Currently reading

Published by INSEAD in Fontainbleau .
Written in English


Edition Notes

Statementby Nathalie Dierkens.
SeriesWorking papers / INSEAD -- no.88/49
The Physical Object
Pagination58p. ;
Number of Pages58
ID Numbers
Open LibraryOL13918742M

Asymmetric information, sometimes referred to as information failure, is present whenever one party to an economic transaction possesses greater material knowledge than the other party. This Author: Andrew Bloomenthal. Equity Issues When in Distress* first-order effect in the seasoned equity market, information asymmetry should matter more for non-distressed firms that have more of a choice which is a decomposed portion of a firm’s market-to-book ratio used as a proxy for the long run value-to-book (LRVTB). We use the change of this measure (ΔLRVTB).

This study aims to examine whether information asymmetry hypothesis can properly explain announcement effects of seasoned equity issues in China. We use the market adjusted model to measure announcement effects in event studies and use six variables (SIZE, AGE, VOL, B/M, VAR, and EARN) as proxies for information asymmetry in multiple regression analyses.   Information asymmetry is a fundamental concept in economics, but its estimation is challenging because private information is generally unobservable. Many proxies for information asymmetry exist including bid/ask spreads, price impacts, and estimates from structural by: 8.

Pecking order theory starts with asymmetric information as managers know more about their company's prospects, risks and value than outside investors. Asymmetric information affects the choice between internal and external financing and between the issue of debt or equity. Therefore, there exists a pecking order for the financing of new projects. Irrelevance with Asymmetric Information, Review of Financial Studies 4, Korajczyk, Robert A., Deborah J. Lucas, and Robert L. McDonald, , Equity Issues with Time-Varying Asymmetric Information, Journal of Financial and Quantitiative Analysis27, Stein, Jeremy, , Convertible Bonds as Backdoor Equity Financing File Size: KB.


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Information asymmetry and equity issues by Nathalie Dierkens Download PDF EPUB FB2

Introduction. Stock prices tend to fall when firms announce their intention to issue additional shares of stock. Studies of seasoned equity issues often attribute this phenomenon to asymmetric information, i.e.

the superior information held by managers relative to shareholders. 1 Numerous economists have investigated whether pre-issue disclosures can alleviate the adverse-selection problem Cited by: The effect of information asymmetry (proxied by adverse selection) on COEC is examined in a fixed effect panel regression model, controlling for size, beta, book-to-market, and sector.

Results document a significant and robust positive relation between information asymmetry and the by: In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other.

This asymmetry creates an imbalance of power in transactions, which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection, moral hazard, and.

Equity Issues and Temporal Variation in Information Asymmetry Article in Journal of Banking & Finance 34(1) January with 65 Reads How we measure 'reads'.

Asymmetric information, firm location, and equity issuance. book value of equity plus balance-sheet defe rred taxes “Information asymmetry and e quity issues,” Journal of Financial and.

resolution of information asymmetry triggered the price run-up, the time varying adverse selection explanation offers an additional testable implication.

Low information asymmetry not only increases the probability of an equity issuance, but firms should also issue a relatively larger volume of equity when.

The paper examines the relevance of information asymmetry between the managers of the firm and the market for the equity issue process.

It uses four proxies for information asymmetry and presents three groups of tests: cross-sectional regressions of the reaction at equity issue announcements, comparisons of information asymmetry before and after the announcements, and analyses of the timing. The voluntary and mandatory introduction of a new information technology, XBRL, in and by the Financial Supervisory Services of Korea has significantly affected capital markets, possibly through a reduction in the information asymmetry between firms and users of financial information.

This study examines how changes in the information environment attributable to XBRL adoption affect Author: Che-Won Ra, Ho-Young Lee. Downloadable (with restrictions).

We investigate the intertemporal relation between information asymmetry and equity issues, and particularly focus on which firms drive this relation. We find that when information asymmetry for a particular firm is low compared to the recent past, the firm is more likely to issue equity as opposed to debt.

This information and experience asymmetry creates issues, not only for the entrepreneur, who doesn't want to be taken advantage of, but also for the VC, who is. Information asymmetry forces issuers to offer shares at a discount, thus suggesting a positive relation between information asymmetry and MLOT.

Prior research has examined the relation between information asymmetry and the cost of going public by examining the level of underpricing, defined as the initial return on the first day of trading. where αμ + ε s + ε b is the daily arrival rate of all orders and αμ is the arrival rate of information-based trades.

The PIN measure for each firm is estimated on an annual basis. The larger the estimated PIN i,t, the greater the intensity of information asymmetry about firm i in year t. Adverse selection component of the bid-ask spread (λ)Lin et al.

develop empirical estimates Cited by: 1. REITs hold relatively little cash and access capital markets often due to their favorable dividend tax status. The transparent nature of REITs, in theory, implies low information asymmetry.

However, we present evidence that this phenomenon is temporal. We find that information asymmetry is relatively low when REITs access the capital markets, when compared to non-accessing periods, Author: Elizabeth Devos, Erik Devos, Seow Eng Ong, Andrew C.

Spieler. 1 INTRODUCTION. We analyze the relation between information asymmetry and firm value in the context of mergers and acquisitions (M&As).

Information asymmetry restricts the flow of information about a firm's strategies and activities, which renders it easier for entrenched managers to consume excess private benefits of control and causes difficulties in firm by: 1. Firms disclose information periodically, and in between disclosure dates, traders can obtain private information, and adverse-selection risk increases.

Such temporary increases in information asymmetry are usually considered to be diversifiable or too small to impact expected stock by: Earnings Timeliness and Seasoned Equity Offering Announcement Effect Yuequan Wang the information asymmetry and describe the information environment.

the ratio of the market value of the equity to the book value of the equity for one fiscal year before the announcement.

Debt VS Equity Financing ACC/ September Debt VS Equity Financing Most businesses are use financing for one reason or another. Whether it be startup, day to day operations, or financial stability financing is a fundamental part of operations.

This summary will address what debt and equity financing are and how they are beneficial in business and everyday life. The lemons problem is an issue of information asymmetry between the buyer and seller of an investment or product.

The name comes from calling a defective used car a "lemon." more. 10 percent or more of any equity class of securities, gain from trading in the securities of their firms.1 However, the specific sources of information lead-ing to insider gains in particular and to information asymmetry in general have not been comprehensively investigated.

An identification of the sources of insiders’ information. Equity Issues and the Disappearing Rights Offer Phenomenon. of public companies among alternative methods for issuing seasoned equity primarily in terms of differences in “information‐asymmetry” and “adverse selection” costs.

The key insight is that a “pure” (or uninsured) rights offering is likely to be the lowest‐cost Cited by:. Financing the Deficit: Debt Capacity, Information Asymmetry, and the Debt-Equity Choice.

probability of debt issuance will initially increase in the size of the deficit as adverse selection costs of issuing equity outweigh the costs due to loss of debt capacity, then decrease as costs due to loss of debt capacity become more important, and Cited by: 4.Key words: equity issues, market timing, information asymmetry, international evidence College of Business, The Florida State University, Rovetta Business Building, Tallahassee, [email protected], (tel)(fax)   The Information Effects of Analyst Activity at the Announcement of New Equity Issues.

(), and McLaughlin, Safieddine, and Vasudevan () use the market-to-book equity ratio as a proxy for information asymmetry. McLaughlin, Safieddine, and Vasudevan find an inverse relation between this measure and subsequent operating performance.