Equity Issues and Aggregate Market Returns under Information Asymmetry

2005 ◽  
Author(s):  
Xiaoquan Jiang ◽  
Gong-meng Chen
Keyword(s):  
Information Asymmetry ◽  
Market Returns ◽  
Equity Issues

Information asymmetry and equity issue decision of low-leverage firms

2018 ◽  
Vol 44 (11) ◽  
pp. 1330-1346
Author(s):  
Bipin Sony ◽  
Saumitra Bhaduri
Keyword(s):  
Information Asymmetry ◽  
Equity Issue ◽  
Content Type ◽  
Equity Issues ◽  
Developed Economies ◽  
Tangible Assets ◽  
Credit History ◽  
The Impact ◽  
Role Of Information

Purpose The purpose of this paper is to investigate the role of information asymmetry in the equity issue decision of two categories of Indian firms with distinct levels of information asymmetry – levered firms and unlevered firms. Design/methodology/approach This paper proposes a novel empirical approach to compare these two categories of firms. Levered firms exposed to the debt markets are under the scrutiny of lenders, reducing their information asymmetry problems. On the other hand, unlevered firms, which are smaller firms with fewer tangible assets and no credit history suffers more information problems. The authors use a propensity score matching method to identify firms that share similar firm-specific characteristics in these groups and compare equity issues to analyze the impact of information asymmetry. Findings The results show that information asymmetry plays a key role in the equity issue decision of Indian firms. Additionally, the authors find that the trends and characteristics of low-leverage (LL) firms in India are comparable to the LL from developed economies, which is consistent with the findings that they face more information problems. Originality/value Unlike the conventional approach of using proxy variables to capture information asymmetry, this study uses a novel framework where the authors compare the equity issue decision of similar firms in two categories with different degrees of information asymmetry.

Stress Testing, Transparency, and Uncertainty in European Banking

2014 ◽  
pp. 520-544 ◽  
Author(s):  
Rym Ayadi ◽  
Willem Pieter De Groen
Keyword(s):  
Early Detection ◽  
Information Asymmetry ◽  
Stress Testing ◽  
Business Models ◽  
Global Financial Crisis ◽  
Stress Tests ◽  
Market Returns ◽  
Cross Border ◽  
Information Gap ◽  
European Banking

In the aftermath of the 2007–2009 global financial crisis EU regulators and supervisors attempted to restore the confidence of still fragile financial system. To allow early detection of ailing banks, enhance transparency, and decrease uncertainty of information asymmetry between market players, supervisors disclosed the results of stress tests to breach the information gap in the market. Between 2009 and 2013 the Committee of European Banking Supervisors (CEBS) and the European Banking Authority (EBA) performed and disclosed results on stress tests, capital, and transparency exercises. Using 572 observations of listed banks subject to six cross-border stress tests exercises in Europe, this event study finds that the announcements of the test itself, methodology, and results were informative at aggregated level and led to significant positive market returns. In turn, the exercises were noninformative for the identification of viable and nonviable banks and not sensitive to the business models of the participating banks.

Information Asymmetry and Debt–Equity Choice: Evidence from an Emerging Market, India

2018 ◽  
Vol 10 (3) ◽  
pp. 228-252 ◽  
Author(s):  
Bipin Sony ◽  
Saumitra Bhaduri
Keyword(s):  
Information Asymmetry ◽  
Emerging Market ◽  
Analyst Forecast ◽  
Indian Market ◽  
Order Model ◽  
Pecking Order ◽  
Analyst Coverage ◽  
Equity Issues ◽  
Role Of Information

We examine the role of information asymmetry in the debt–equity choice decisions of firms from an important emerging market, India. Information problems are more severe in the emerging markets and we find strong evidence in favour of information asymmetry playing a key role in the capital structure decisions of Indian firms. Consistent with the pecking order model, we find that equity issues are lesser in number and firms facing fewer information problems issue equity. We use novel variables such as analyst coverage, analyst forecast surprise and dispersion to capture information asymmetry in the Indian market. JEL: G32

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