The effects of information asymmetry on the value of the companies listed in Tehran Stock Exchange

Abstract: Information asymmetry arises when one of the parties to the contract or transaction, possesses more information than the other, provided that the former uses such information effectively when communicating with the latter. The main objective of this study was to examine the effects of information asymmetry on the value of companies. Two techniques i.e. standard deviations of returns (STDRET) and turnover (TURNOVER) were used to determine information asymmetry while the Tobin’s Q was employed to determine companies’ value. The population under study was all the listed companies in Tehran Stock Exchange, of which a total of 72 companies were chosen as the research sample and were studied over the period 2004-2009. Panel analysis technique was used in this study to analyze the collected data. The results of the study indicate information asymmetry affect the value of the companies.

How to cite this paper

 Ghorbani, A. (2013). The effects of information asymmetry on the value of the companies listed in Tehran Stock Exchange.Management Science Letters , 3(4), 1049-1056.

Refrences

Aflatouni, A., & Nikbakht, L. (2010). The application of econometrics in accounting, financial
management and economics research. Tehran: Termeh Publications, [In Persian].

Accounting Standards (2007). Standard No. 25: p. 520: The Auditing Organization. Tehran, Iran.

Barney, J.B., & Hesterly, W.S. (2012). Strategic management and competitive Advantage. concepts
and cases. Fourth edition: Pearson Press.

Chiappori, P. A., & Salanié, B. (2000). Testing for asymmetric information in insurance
markets. Journal of Political Economy, 108(1), 56-78.

Clarke, J. E., Fee, C. E., & Thomas, S. (2004). Corporate diversification and asymmetric information:
evidence from stock market trading characteristics. Journal of Corporate Finance, 10(1), 105-129.

Flannery, M. J. (2012). Asymmetric information and risky debt maturity choice.The Journal of
Finance, 41(1), 19-37.

Gilligan, T. W., & Krehbiel, K. (1989). Asymmetric information and legislative rules with a
heterogeneous committee. American Journal of Political Science, 459-490.

Ghaemi, M.H., & Vatanparast, M. (2005). Investigating the role of accounting information in
reducing information asymmetry in the Tehran Stock Exchange. Journal of Accounting and
Auditing Review,12(41),85-103.

Harford, J., Mansi, S. A., & Maxwell, W. F. (2008). Corporate governance and firm cash holdings in
the US. Journal of Financial Economics, 87(3), 535-555.

Hassani, M., & Taheri, F. (2012). The role of earnings management and dividend announcement in
explanation of information asymmetry: Evidence from Tehran Stock Exchange. Management
Science Letters, 2(7), 2537-2544.

Kazemi, H., & Rahmani, F. (2012). Relationship between information asymmetry and cost of capital.
Management Science Letters, 3(1), 321-328.

Keller, G. (2011). Statistics for management and economics. South-Western Pub.
Miller, M. H., & Rock, K. (2012). Dividend policy under asymmetric information.The Journal of
Finance, 40(4), 1031-1051.
Rahnema Rudposhti, F., & Salehi, A.K. (2010). Financial and accounting schools and theories (1st
Edition). Tehran: Islamic Azad University (Central Tehran Branch).

Sharpe, S. A. (2012). Asymmetric information, bank lending, and implicit contracts: A stylized model
of customer relationships. The Journal of Finance,45(4), 1069-1087.

Wang, J. (1993). A model of intertemporal asset prices under asymmetric information. The Review of
Economic Studies, 60(2), 249-282.