The tension results from two key elements of the model. First, the two labor mar- kets may di ff er in competitiveness. In this paper, competitiveness of a market is defined as the ratio of the number of applicants who apply to the market to the number of career paths in it. Notice that the more competitive the market is, the lower the acceptance rate is in that market. Going back to the example of under- graduate students, if the number of agent pursuing a graduate education are much larger than the number of jobs requiring postgraduate degrees, then the employment rate of graduate schools would be very low. In this case, even though career paths with postgraduate degree provide much better payo ff s, students may participate in the less desirable market. The other component to consider is the applicants’ rel- ative ranking in each market. The ranking is important even when markets have enough career paths for applicants since a low-ranked agent in one market could get a higher payo ff in the other market. That is, the outcome of the career choice is not straightforward since the information about ability is private information when agents make their choice over two markets.
According to Taiwan’s lending practices, when applying for bank loans, MLBs should provide audited financial statements for the past three years, and inquiries should be made through JCIC to ascertain the credit score of the chairperson and whether or not the MLBs and MSBs have had bad credit records in the past. However, as to whether these practices can enhance the lending performance and reduce the credit risk is a matter worth systematic investigation. Past empirical studies have been more focused on how the ownership type, scale and transaction frequency have impacted the banking relationship. To our knowledge, there are no studies using “WOBD” and “HCCL” that have sought to reflect bank lending performance and further explore how the informationasymmetry and credit records of the borrowers impact lending performance. Based on our understanding, banks that belong to the “WOBD” category are always large in scale and banks that belong to the “HCCL” category are mixed, including large and small banks. Most of the “HCCL” banks are newly-established banks. Therefore, we refer to the following relevant articles in developing our hypotheses: “Careless Lenders and Bad Borrowers, “(Shen and Wang, 2002), “The Top One and Non-top One Financing Bank–viewpoints of lending behavior,” (Chen and Lai, 2003). Berger et al. (2008) referred to the five relationships motivation theory 9 which also provided us with the inspiration to predict the positive or negative directions of our results. The following four hypotheses are presented and discussed:
on their underlying assets, the derivatives in the proposed model take reduced forms and they are interpreted as straddles. The most relevant paper to ours is by Cao and Ou-Yang (2009), who also model a set of call and put options. However, the authors only conduct the analysis in an economy with heterogeneous beliefs without any implications for information acquisition. Our work is also related to the large strand of literature on financial innovation (Allen and Gale, 1994, Brock, Hommes and Wagener, 2009, Dow, 1998, Dieckmann, 2011, Duffie and Rohi, 1995, Simsek, 2013a,b, Weyl, 2007 and Chabakauri, Yuan, Zachariadis, 2014). However, most studies in this literature stream examine the impact of financial innovations without informationasymmetry. For example, Brock, Hommes and Wagener (2009), Simsek (2013a) and Simsek (2013b) emphasize the destabilizing effect of financial innovations due to hetero- geneous beliefs. The most relevant paper to ours in this body of literature is by Dow (1998), who proposes a hedge-more/bet-more effect in an economy with asymmetric information. The author finds that a new asset induces risk averse arbitrageurs to hedge their positions in the preexisting security, which affects the old market’s liquidity. This hedge-more/bet-more effect may have a negative effect on all investors’ welfare. However, we show that options do not have a direct effect on the underlying asset, which confirms the findings by Chabakauri, Yuan, Zachariadis (2014). Moreover, we find that options affect the underlying assets through their effects on information acquisition.
This study analyzes the yield differences between GO and RV bonds issued by city and county governments during 1990-1999. GO bonds finance general expenditures of the municipality and are supported by the full faith and taxing power of the municipality. RV bonds finance special revenue projects and repayment of debt service is from cash flows of these special projects. Reflecting these differences, the True Interest Cost (TIC) on RV bonds is greater than that on GO bonds by an average of 74 basis points. This difference shrinks to 44 basis points after controlling for external economic factors, issuer and issue characteristics, syndicate structure, credit rating and maturity. We tested the impact of informationasymmetry on the municipal bond yields. We use the original issue spread as a proxy for informationasymmetry. The average spread is 1.172% for RV bonds and 0.892% for GO bonds and the difference is statistically significant. This difference has significant explanatory power for the yield differences between GO and RV bonds. Credit rating also has significant explanatory power, but it does not fully capture the qualitative differences between the two categories of municipal bonds. The difference persists and remains statistically significant within each credit rating category. For AAA-rated issues, TIC of RV bonds is greater than that of GO bonds by an average of 16 basis points. This difference increases as credit rating decreases.
An integral component in the field of market microstructure is the analysis of the information content of trades (see Pascual, Escribano and Tapia, 2004). It is generally accepted that market participants learn and update their beliefs and limit order quotes from incoming order flow. This process where passive traders adjust their positions from incoming active trades forms price discovery. In informationasymmetry models (Kyle, 1985; Glosten and Milgrom, 1985; Easley and O’Hara, 1987; Admati and Pfleiderer, 1988; Foster and Viswanathan, 1993), the market is divided into two types of participants: informed and liquidity (uninformed) traders. Liquidity traders (and market makers) gradually revise quotes to reflect the private information from observing past trades by informed participants. In essence, price dynamics are determined through trade-by-learning mechanisms. For this reason, the private information is disseminated through the trading process described as a tˆ atonnement process, as prices are gradually adjusted to reflect the expectation of the true value of the security based on all current information avail- able in the market place. In an environment with no additional information, prices converge to the true value in the long run via continuous trading and subsequent quote revisions by market makers. This adjustment in quotes is known as the price impact of a trade. Therefore, the study of price impact is a key component to understanding the dynamics of the price discovery process.
divided into three stages, namely the adoption stage, set IASB states that the general purpose financial in the time span 2008-2010. At this stage, the steps reporting (communication of financial information to the undertaken are: adoption of IFRS to IAS whole, user) is to provide financial information about the entity preparation of necessary infrastructure and evaluate and reported that are useful for potential investors, lenders manage the impact of the adoption of SFAS applicable. and other creditors in making decisions about providing The second stage is the final preparation stage, set within resources to the entity. These decisions including buying, the period of 1 year, i.e., 2011. At this stage, the steps selling or holding equity and debt instruments and undertaken are: completion of the preparation necessary providing or settlement loans and other forms of credit. So infrastructure and application of gradually some of that, the decisions taken are accurate, then the accounting SFAS-based IFRS. And the last stage is the information generated accounting information to be implementation phase, in 2012 with the following steps: useful, information that meets the needs of the user. To be the application of IFRS-based SFAS gradually and useful, the accounting information (financial) must be Evaluation of the impact of adoption of SFAS relevant and it aptly describes what is meant to be comprehensively. According to the roadmap above, the described (faithfully represents). The usefulness of full adoption of IFRS in Indonesia was in 2012. financial information will increase if the information is
In Indonesia there are only a few of researches that discuss the impact of Intellectual Capital Disclosure (Barus & Siregar, 2014; Daud & Amri, 2008; Ifonie, 2012; Kuryanto & Syafruddin, 2009). But previous research only analyzed the influence of intellectual capital revelation completely without (analyzing each component). Accordingly, this study attempts to extend previous studies by examining the impact of Intellectual Capital Disclosure in depth based on its components (Human Capital Efficiency, Structural Capital Efficiency and Capital Employed Efficiency). Besides, this research also analyzed the implication of Intellectual Capital Disclosure and AsymmetryInformation towards corporation’s stock price. This research only focused on LQ45 corporations in 2014-2015 Stock Exchange.
Abstract Improving the access of small and medium-sized enterprises to funding sources is an interest shared by governments, central banks and supervisory ministries ... this interest explains in an important aspect the problem of asymmetric information which is become more and more interesting, especially after the development of the information economy and economies of uncertainty since the early eighties. Banks consider that the lack of information production and the weak financial structure of small and medium enterprises are key factors in the mistiness of their relationship, which explains why banks are hard to deal with this type of institution. The theory of microeconomics addresses the problem that is at the heart of the modernization of microfinance theory. We will try to identify the most important implications for the financing decisions of banks under asymmetric information, and then drop those concepts on the case of Algeria by addressing the following axes:
et al., 2006). Corporative sovereignty mechanisms affect disclosed information by stockholders and decreases complete information non- disclosure and disclosure of weak information (Kanagaretnam et al., 2007). Studies show that if there is a more effective control for manager by board of directors, quality and quantity of published information by manager will increase (Karaman and Nikos, 2005). Improvement of disclosure quality cause informationasymmetry and decrement of informationasymmetry brings less profit (Noravesh and Hosseini, 2009). Financial statements provide information that causes informationasymmetry and shows that investors must apply this information in their decisions (Ahmadpur and Rasaeian, 2006). Reaction of market to profit bill is the first criterion for existence of confidential information. Existence of confidential information suggests informationasymmetry in market environment. Kanagaretnam et al., (2007) showed that market liquidity increases with decrement of informationasymmetry. Liquidity means ability to convert assets to cash without any loss or cost. Difference of buy and sell proposed price for stocks and market depth are liquidity criteria, which they are examined as informationasymmetry representatives in the recent studies (Dennis et al., 2003). Difference of highest buy proposed price and lowest sell proposed price is called "difference of buy and sell proposed price". A transaction occurs when highest buy proposed sell and lowest sell proposed price are equal. A continuous trend of buy and sell orders with higher and lower prices than the equilibrium price
implications on investment behavior (Miller & Rock, 1985; Stiglitz, 2002). It is now widely accepted that information asymmetries are inevitable. Hence the critical question one should address is not whether information irregularities exist in a market but, instead, how markets handle them and even more importantly how well they do so: “The most fundamental reason that markets with imperfect information differ from those in which information is complete is that, with imperfect information, market actions or choices convey information” (Stiglitz, 2002, p. 468). Naturally, market structure became the point of attention. Corporate governance and disclosure mechanisms, government intervention and corruption levels, market liquidity, ownership concentration, and the stage of market development are some of the key criteria widely utilized to assess the risk profile of a market and its overall
accelerated filers are smaller firms than the rest of the cross-section. This raises concerns over whether the parallel trends assumption holds in our setting. In order to deal with this potential limitation of our DD tests, we run a series of propensity score matching (PSM) tests. PSM procedures (Rosenbaum & Rubin, 1983) help identify control firms that exhibit minimal observable differences in characteristics relative to treatment firms. Thus, for each pair of matched firms in our tests the only key difference is whether they comply with SOX or not. Therefore, using the matched firms we can isolate the impact of SOX on foreign investment and at the same time satisfy the parallel trends assumption. To implement PSM, we first calculate the probability (propensity score) that a firm with certain characteristics will have to comply with SOX. We run probit regressions where the propensity score is a function of the firm variables we also use in the DD models. Then, we run different matching algorithms (i.e., Radius, Nearest Neighbor(s) and Kernel) to create pairs of matched firms; this ensures the robustness of our results. In Table 6, we report the average treatment/SOX effect on the treated (ATT), separately for FIO, ACTIVEFIO and PASSIVEFIO (Panels A-C). The results are not only consistent with the DD ones (Table 5) but also stronger in terms of both
On the other hand, the absence of informationasymmetry does not mean that the problems related to information disappear. For example, it is known from the game theory that information symmetry can produce deadlock because the behaviours associated with the particular power status produce impasse rather than an effective process to satisfying results (for more details, see Zartman, 1997). High-power symmetry allows each party to hold the other in check; and so it makes them primarily concerned with maintaining their status locking in their side of the symmetry rather than reaching an agreement. On the other hand, low-power symmetry brings together two parties that act in the reverse way-symmetrically to produce the same result. They deadlock since they do not have the power to make the other move, and this makes them primarily concerned with defending whatever little status they have unlocking in their side of the symmetry rather than reaching an agreement. Therefore, the information symmetry tends to produce and reinforce hostility and prolong negotiations in conflict situations. As a result, it calls for a mediator, a role that is possible among low-power parties but much less so between high-power opponents (for more details, see Zartman, 1997).
In our model, different financial markets are characterized by different degrees o f transparency. To each financial m arket corresponds an “unin form ed window” as shown in figure 3. The m ore transparent the financial m arket is, the smaller the “uninformed window.” In our setup, where the project’s return is uniformly distributed over the interval [— a, a ] , we define the uninform ed window as the subset [—a', a'] (0 < a' < a). We assume that the outsider can perfectly observe the true value of states in the case of extreme return realizations (very high or very low) that fall outside the u n inform ed window. However, the shareholder cannot distinguish any given ex post return sampled inside the uninform ed window from other returns in the uninform ed window. The shareholder thus has to rely on the m anager’s accounting report for m ore information. The idea of defining an unin form ed window can be described as follows. In every financial m arket, we can classify two kinds of communication channels between shareholders and m anagement: accounting and nonaccounting reports. The nonaccounting channel is m ore powerful in transparent markets than in opaque ones. In fact, in m ore transparent financial markets like the United States, there is a greater analyst and media coverage through such institutions as investment banks and rating agencies for instance. All these nonaccounting channels make the shareholder less dependent on the m anager’s accounting report. Hence, the uninform ed window, within which the shareholder has to rely
Institutional investors are likely to have limits with respect to the positions they can take in any single stock. Having a large block enables them to obtain inside information, but they may not be able to increase this position further on positive news nor are they allowed to benefit from derivative trading in such a situation. However, negative information about the firms prospects can be exploited as the fund can liquidate or at least reduce its stake. Information advantages of institutional investment therefore give rise to an asymmetric market time ability with respect to position liquidations but not position acquisitions. The empirical part uses quantile regressions to infer the correlation of the holding change with future excess returns for different quantiles of the portfolio weight change. According to hypothesis 1, the most negative portfolio weight changes should yield the highest correlation with future excess returns.
The critical issue in the identification of the impact of ICT investment on ed- ucation is the endogeneity of ICT investment and usage. For instance, we are likely to observe a positive association between home ICT and university atten- dance if students receive their personal computer as a reward for good school performance. Furthermore, there is ambiguity in how students with different char- acteristics would use their ICT devices. It would seem that some students indulge in computer games rather than information searching and learning. Conversely, some students may use technologies more effectively with the help of parents and relevant training at school. As an attempt to mitigate these concerns, I employ a matching approach to estimate the treatment effects of a personal computer on educational outcomes. With less parametric dependence, observations can be compared in a “simulated” environment of randomisation that is created by the matching procedure. I acknowledge that matching estimation of treatment ef- fects rests on the Conditional Independence Assumption (CIA), i.e. no relevant unobservable once matching on observables occurs. Bias arises if there are unob- servable variables that affect treatment status and outcome. As robustness checks, I test the sensitivity of estimated results to changes of various confounders using bounding and simulation methods.
has been widely studied, but also the voter’s capacity to process this information cor- rectly. Based on these results, it would be reasonable to expect a lack of information to make voters worse-off. It makes them less able to scrutinise the actions of politicians, and less able to evaluate the impact of these actions on their welfare. However, additional information is not always beneficial if it affects the strategic behaviour of policy makers. Overconfidence is a special type of bias. Voters are not poorly informed per se, but think that their information is of better quality than it really is. This implies that overconfi- dent voters are not uninformed, but lack the capacity to draw correct inferences from the information they have. This misperception was originally documented by Alpert & Raiffa (1982) who show that subjects consistently overestimates the accuracy of their predictions. Moore & Healy (2008) identify three different types of overconfidence: over-estimation, over-placement, and over-precision, and show that the last type – the one studied in this paper – is more persistent. Block & Harper (1991) suggest that overconfidence could be driven by an anchoring-and-adjustment process, while Ortoleva & Snowberg (2015) show how neglecting the correlation between different information sources leads to overconfi- dence. Given the prevalence of this trait, this paper addresses the question: how does the misperception of their information – rather than the lack of information – affect voters’ ability to incentivise and select politicians?
B) If the “Fame” of any entrepreneur is negative, it is an obvious signal to all players in the system to be alert to potential moral hazard and fraud risks. An entrepreneur with negative “Fame” can be defined as a person who has a poor or unsuccessful track record of activities. Funders can read details of the history of entrepreneur to know the reasons for their poor “Fame”. The infamous entrepreneur might have cheated or defrauded or had some failure with implementation of earlier projects thereby indicating that he is notto be entrusted with the funds of a project.Another reason to avoid partnership with an infamous entrepreneur is the negative impact of a failed project on funders' “Fame”. If a funder funds an unsuccessful project, his/her “Fame” will decrease accordingly. Hence, very few funders are interested in investing in a project with an infamous entrepreneur. Hence the number of failed projects and infamous entrepreneurs will decrease in the system.
This thesis investigates the importance of informationasymmetry in self-selection when evaluating target returns around an announcement date through consideration of the average abnormal returns of financial (private equity) versus strategic (tender/merger offer) takeover bids during a period of possible informed trading. A dataset of 1,750 United States target firms consisting of 1,424 tender/merger offer targets and 326 private equity targets firm stock prices are used to examine equity market responses to determine if valuation effects convey asymmetric information through bid announcements, and in pre- and post- periods of trade. This study argues that both types of takeovers have strong incentive and ability to reduce agency costs and thus create stakeholder wealth; however, pre-announcement information asymmetries account for differences in post- announcement valuation effects. This study provides evidence that takeover announcements are not randomised, as managers rationally determine whether to submit a bid, indicative of timed announcements. The findings show that private equity firms exhibit lower price impact post-announcement, but both investor group targets have a significant increase in average abnormal returns over the window [-1, +1]. While results indicate positive abnormal returns for both takeover platforms, this result is interpreted as investment strategy impacting the level of perceived informationasymmetry and therefore degree of price impact pre and post-announcement. The long-term financial (rather than strategic acquisition position) of private equity takeovers, coupled with higher private information pre-announcement, leads to lower abnormal returns post- announcement.
We have made precise different pricing probabilities. First of all, we assume that a pricing probability Q is given with respect to the filtration F of the fundamental process X. Usually, we choose Q such that X is an (F, Q) local martingale. Since we shall focus on the change of probability measures due to the different sources of informations and on its impact on the pricing of credit derivatives, we may assume, without loss of generality, the historical probability P to be the benchmark pricing probability Q on F. For the same reason, we will consider the same pricing probability for the filtration F and its progressive enlargement G. 1 Given the pricing probability Q on F (and thus on 1 In general, a ( F , Q ) local martingale is not necessarily a ( G , Q ) local martingale except under (H)
The following findings can be established for Table 2 on the linkages between financial activity, financialisation and informationasymmetry. First, on the left-hand-side (LHS) related to banking system activity, (i) the PCRs interact with financial formalisation to produce a positive marginal effect, (ii) the corresponding net effect is positive, while (iii) a positive synergy is apparent instead of a threshold because both the unconditional and conditional effects are positive. Second, still on the LHS, (i) the PCBs interact with financial informalisation to produce a positive marginal impact, (ii) the corresponding net effect is negative, and (iii) the positive threshold is not within the range. Third, the findings on the LHS of the banking system activity are confirmed by those on the right-hand side (RHS) of the financial system activity. Fourth, the significant control variables have the expected signs. In Table 3, on the linkages between financial efficiency, financialisation and informationasymmetry, no valid inferences can be derived from the RHS at the 1% significance level because the post-estimation diagnostic tests reveal the presence of autocorrelation in the residuals. On the LHS, the two specifications in which post-estimation autocorrelation are absent have either an unconditional or a conditional effect that is insignificant.