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1 – 10 of over 23000Subodh Kulkarni, Matteo Cristofaro and Nagarajan Ramamoorthy
How can managers reduce information asymmetry in dyadic manager-external stakeholder relationships in a complex and evolving environment? Addressing this question has significant…
Abstract
Purpose
How can managers reduce information asymmetry in dyadic manager-external stakeholder relationships in a complex and evolving environment? Addressing this question has significant implications for firm survival, growth, and competitive advantage.
Design/methodology/approach
We have adopted a multiparadigm approach to theory building, known as metatriangulation. We integrate the dynamic capabilities, sensemaking, and evolutionary theory literatures to theorize how managers can relate to stakeholders in a complex and evolving environment.
Findings
We propose, via a conceptual framework and three propositions, “evolutionary sensemaking” as the managerial metacognitive dynamic capability that helps managers hone their understanding based on the evolutionary changes in the stakeholder’s interpretations of information quality preferences. The framework unfolds across three evolutionary stages: sensing preferences' variation of the stakeholder, seizing preferences, and transforming for complexity alignment and retention. The propositions focus on managing complexity in stakeholder information quality preference, employing cognitive capabilities to simplify, interpret, and align interpretations for effective information asymmetry reduction.
Practical implications
To develop the metacognitive dynamic capability of evolutionary sensemaking, managers need to train for and foster the underlying complex cognitive capabilities by enhancing their (1) perception and attention skills, (2) problem-solving and reasoning skills, and (3) language, communication, and social cognition skills, focusing specifically on reducing the complexity embedded in stakeholder cognition and diverse stakeholder preferences for information quality. Contrary to the current advice to “keep things simple” and provide “more” information to the stakeholders for opportunism reduction, trust-building, and superior governance, our framework suggests that managers hone their cognitive capabilities by learning to deal with the underlying complexity.
Originality/value
The proposed framework and propositions address research gaps in reducing information asymmetry. It enriches the dynamic capabilities literature by recognizing complexity (as opposed to opportunism) as an alternative source of information asymmetry, which needs to be addressed in this stream of research. It extends the sensemaking literature by identifying the complexity sources – i.e. stakeholder preferences for diverse information quality attributes and the associated cognitive preference interpretation processes. The article enhances evolutionary theory by delving into microprocesses related to information asymmetry reduction, which the existing literature does not thoroughly investigate.
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Setyo Tri Wahyudi, Kartika Sari, Rihana Sofie Nabella and Dyah Dwi Zubaidah
Banks are intermediary institutions that play an important role in accelerating economic growth. Therefore, banks need to implement policies to improve the efficiency and quality…
Abstract
Banks are intermediary institutions that play an important role in accelerating economic growth. Therefore, banks need to implement policies to improve the efficiency and quality of digital finance, namely through the Extensible Business Reporting Language (XBRL), which developed amid Society 5.0. However, the application of XBRL does not completely rule out the possibility of information asymmetry. Therefore, this study aims to analyze the effect of Extensible Business Reporting Language (XBRL) on asymmetric information with corporate disclosure as a moderating variable (expected to reduce information asymmetry) and analyze the effect of XBRL and control variables (size, turnover, stock price) on information asymmetry. The sample used is conventional banks that have been listed on the IDX and are not delisted, from 2015, since the implementation of XBRL until 2019 using the panel data regression method. The results obtained are that information asymmetry decreases with the application of XBRL, where corporate disclosure is a moderating variable. For the results of the control variable, the larger the size, the less information asymmetry and turnover. As for the stock price, the higher the stock price, the higher the information asymmetry.
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Olimpia Meglio, David R. King and Elio Shijaku
Acquisitions are complex and ambiguous events fraught with information asymmetries emphasizing market failure before an acquisition or organizational failure during integration…
Abstract
Acquisitions are complex and ambiguous events fraught with information asymmetries emphasizing market failure before an acquisition or organizational failure during integration. While often treated in isolation, market and organization failure are intertwined in acquisitions as integration planning starts before a deal is closed. Effective integration begins with a deep understanding of the target to be able to share assets and knowledge. However, acquiring firms currently have limited solutions to address information asymmetries. Most remedies primarily aim at market failure using due diligence and external advisors, leaving information asymmetry due to organizational failure primarily unattended. The authors develop a typology that leverages informal and formal social ties to address information asymmetries across the acquisition process that jointly considers market and organizational failure. The typology of this study combines existing research to develop how social ties with stakeholders influence acquisitions and can increase their success.
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Aparna Bhatia and Amanjot Kaur
The purpose of this paper is to investigate whether information asymmetry mediates the relationship between disclosure and cost of equity.
Abstract
Purpose
The purpose of this paper is to investigate whether information asymmetry mediates the relationship between disclosure and cost of equity.
Design/methodology/approach
The study is based on a sample of 500 companies listed in Bombay Stock Exchange for a period of six years from 2015 to 2021. Panel data regression is applied to analyze the relationship between voluntary disclosure, cost of equity and information asymmetry. Mediation effect of information asymmetry is tested with the help of Barron and Kenny’s (1986) approach.
Findings
Findings suggest that in case of Indian companies, disclosure reduces cost of equity directly and indirectly through mediation of information asymmetry. Indian investors value credible information for better estimation of future returns, supporting the validity of estimation risk and stock market liquidity hypothesis, which proposes an inverse relationship between disclosure and cost of equity.
Research limitations/implications
Managers can use the findings to strategize their disclosure policy and secure funds at lower cost. Shareholders can monitor managerial actions by demanding credible disclosures. Government too can encourage voluntary disclosure by providing special incentives to the firms.
Originality/value
This study is a pioneering research that investigates the mediating influence of information asymmetry between disclosure and cost of equity with reference to the Indian corporate landscape.
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Malik Muneer Abu Afifa and Mustafa Saadeh
This paper aims to investigate the relationship between voluntary disclosure and the cost of capital as a direct relationship and as an indirect relationship mediated by…
Abstract
Purpose
This paper aims to investigate the relationship between voluntary disclosure and the cost of capital as a direct relationship and as an indirect relationship mediated by information asymmetry. It provides evidence from Jordan as a developing economy.
Design/methodology/approach
The sample was selected from the companies listed in the first market of the Amman Stock Exchange during the period 2010–2019. Four exclusion criteria were used in selecting the companies for analysis.
Findings
The findings show that the cost of capital and information asymmetry are negatively affected by voluntary disclosure, as well as that the cost of capital is positively affected by information asymmetry. In addition, information asymmetry does not mediate the relationship between voluntary disclosure and the cost of capital.
Originality/value
This research looks at the mediating effect of information asymmetry in the relationship between voluntary disclosure and the cost of capital; thus, it provides new explanations about it using empirical evidence from a developing economy. As a necessary consequence, this research has the potential to significantly contribute to the existing body of knowledge and literature in this field.
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Fujun Lai, Jian Wang, Chang‐Tseh Hsieh and Jeng‐Chung (Victor) Chen
This paper seeks to investigate and provide empirical evidence of the interrelationships among network externalities, e‐business adoption and information asymmetry.
Abstract
Purpose
This paper seeks to investigate and provide empirical evidence of the interrelationships among network externalities, e‐business adoption and information asymmetry.
Design/methodology/approach
A conceptual model was proposed and tested using 307 completed interview cases selected from a database of 2,075 Chinese international trading companies published by the Beijing Municipal Bureau of Commerce for this study.
Findings
The results indicated that network externalities significantly influenced e‐business adoption and information asymmetry, and e‐business adoption influenced information asymmetry through information sharing and collection. A split sample analysis showed that cultural contexts significantly moderated the interrelationships among network externalities, e‐business adoption, and information asymmetry.
Research limitations/implications
Data for this study were collected only from mainland China, therefore, non‐Chinese companies (foreign‐owned) operating in China may have been influenced by Chinese cultures and some of them have been localizing their operations in China. The influences of network externalities on business performance and decision making remain unclear. In addition, data were collected from self‐reported questionnaires, and thus may be subject to self‐reporting bias. Future studies should use more objective measurements to reduce the potential for self‐reporting bias.
Practical implications
This study contributes significantly to the literature by providing empirical evidence on interrelationships among network externalities, e‐business adoption, and information asymmetry. The findings in this study also provide valuable insights for managers to better understand the influence of network externalities on e‐business adoption.
Originality/value
This study contributes significantly to the literature by providing empirical evidence of the interrelationships among network externalities, e‐business adoption, and information asymmetry. The findings also provide managers with valuable insight into better understanding of the nature of these interrelationships.
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This paper aims to examine whether firms with high information asymmetry disclose more information under a continuous disclosure regime, and, second, the paper examines whether…
Abstract
Purpose
This paper aims to examine whether firms with high information asymmetry disclose more information under a continuous disclosure regime, and, second, the paper examines whether continuous disclosures reduce information asymmetry.
Design/methodology/approach
The study models relations between continuous disclosures and information asymmetry using ordinary least squares regression and two-stage least squares regression.
Findings
The study finds firms with high information asymmetry disclose more information. Further, the study finds that disclosure in the presence of high information asymmetry increases asymmetry. Finally, while bad news increases information asymmetry, the disclosure of firm-specific good and bad news is associated with reduced information asymmetry.
Originality/value
The paper identifies conditions under which Continuous Disclosure Regime increases information in markets and influences information asymmetry.
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Imeda A. Tsindeliani and Irina E. Mikheeva
The purpose of this study is to identify the prospects and main directions for improving Russian legislation on the protection of the rights of consumers of financial services…
Abstract
Purpose
The purpose of this study is to identify the prospects and main directions for improving Russian legislation on the protection of the rights of consumers of financial services taking into account the specifics of information asymmetry in banking.
Design/methodology/approach
Using the method of economic and legal analysis, the essence of information asymmetry in banking in the Russian Federation was considered. Taking into account international experience, the analysis of the legislation of the Russian Federation in the existing regulatory and legal field is carried out. A forecast of probable changes in the field of legal regulation of information asymmetry issues in banking was also carried out.
Findings
This paper deals with cases when information asymmetry can be recognized as unfair behavior. The main features of information asymmetry in banking on the part of credit institutions in terms of banks’ failure to provide information on the content of banking services on the right to refuse additional services have been studied.
Originality/value
This study suggests that the current Russian legislation does not provide the necessary protection for consumers of financial services from information asymmetry. Based on a comprehensive analysis of legislation and judicial practice, the information asymmetry in this paper is delimited as an economic and legal concept; the prerequisites and main forms of information asymmetry in banking are determined. The main provisions and conclusions of this study can be used in legislative activities when developing provisions on the protection of the rights of financial services consumers.
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Sangeetha K. Prathap and Sreelaksmi C.C.
Consumers often face a dilemma regarding the purchase decisions of traditional handloom apparel because of the non-availability of information cues that would enable them to…
Abstract
Purpose
Consumers often face a dilemma regarding the purchase decisions of traditional handloom apparel because of the non-availability of information cues that would enable them to assess the quality of the product. The spread of counterfeit products in the market adds to information asymmetry. The study aims to examine factors influencing purchase intention of traditional handloom apparel that have Geographical Indication (GI) certification, which follows the certification procedure specified by the World Intellectual Property Organisation (WIPO).
Design/methodology/approach
A survey was conducted among 202 traditional handloom apparel consumers in India and the data was analysed using structural equation modelling. The purchase intention of GI certified handloom apparels was examined as the dependent variable, whereas quality consciousness, product diagnosticity, perceived information asymmetry were placed as independent variables. The mediating role of perceived quality and product trust in the relation between perceived information asymmetry and purchase intention was also looked into.
Findings
Results reveal that quality consciousness positively influences product diagnosticity (facilitated by the GI label certification) which in turn reduces perceived information asymmetry. Further, a reduction in perceived information asymmetry was found to increase the purchase intention of traditional handloom apparel, fully mediated by the perceived quality and product trust.
Research limitations/implications
The customers who are facing a dearth of information while making purchase of traditional handlooms will be benefitted from the GI certification label which provides authenticity regarding product attributes confirming quality. Further, the study adds to the theory by establishing the relation between quality consciousness and perceived information asymmetry.
Practical implications
The findings imply that GI handloom apparel sellers should design marketing strategies that would project GI certification labels for traditional handloom apparel to effectively communicate product quality attributes, thus enhance product diagnosticity reducing information asymmetry. While organic certification for agricultural products is done at the individual producer’s level, GI certification is done under the producer’s collective label. Further, studies may be extended to agricultural products (Darjeeling tea, Alphonso mangoes, etc.), food items (rasgulla, Thirupathi laddoo, etc.) and handicrafts (Aranmula Mirror, Payyannur pavithra ring) that have acquired GI label in India. GI certification is adopted worldwide and studies may be extended to such products also [example Parma ham (Italy), Hessian wine (Germany)].
Originality/value
Empirical research on determinants of consumer purchase intentions of GI certified traditional handloom apparel is a novel attempt done in the context of a developing country such as India. The study brings out the importance of the GI certification label envisaged by the WIPO, which can serve as a tool for reducing uncertainties faced by consumer in framing purchasing intentions. This can be extended to any product type such as agricultural, food products and handicrafts that has acquired GI certifications in different countries. The study revealed that product diagnosticity (through GI certification) could reduce perceived information asymmetry that leads the consumer to the perception of quality and product trust which results in the purchase intention of traditional handloom apparel. The outcomes of the study can be instrumental in designing marketing strategies for capturing market share.
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Mohammed Iqbal and Shijin Santhakumar
This study aims to measure the magnitude of information asymmetry between insiders and outsiders in Indian equity market. The study also investigates the effect of major…
Abstract
Purpose
This study aims to measure the magnitude of information asymmetry between insiders and outsiders in Indian equity market. The study also investigates the effect of major information sources that affect information asymmetry namely, the informativeness of financial statements, news reports about the company and analyst follow-up.
Design/methodology/approach
Six-month profitability of insider trade was used as the proxy to measure information asymmetry. Fama-MacBeth two-stage regression was used to analyse the effect of information sources upon information asymmetry.
Findings
The results of the analysis demonstrate that in comparison with findings of similar studies the level of information asymmetry is comparatively high in India. On an average, profitable insider traders in India earn 19.28 per cent return than outside investors. Purchase transactions are more profitable than sales transactions, while the size of company and information asymmetry is associated inversely. Further, news and analyst follow-up are inversely associated with information asymmetry whereas informativeness of financial statements has little effect on information asymmetry.
Practical implications
The study have important insights for corporates in insider information management and legal compliance of insiders’ market activities. Results pointing to the requirements of a deeper Regulatory monitoring and stringent legal framework.
Social implications
The result validates the concerns of investor protection against informed trade.
Originality/value
The measurement of information asymmetry using profitability of insider trade is novel in Indian context even though the methodology is often used in the literature.
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