Governance Quality and Information Asymmetry. Issue 2 (6th April 2015)

• Record Type: Journal Article
• Authors: Elbadry, Ahmed; Gounopoulos, Dimitrios; Skinner, Frank
• Is Part Of: Financial markets, institutions and instruments. Volume 24:Issue 2/3(2015)
• Page Start: 127
• Page End: 157
• Publication Date: 2015-04-06
• Subjects: Corporate Governance Mechanisms -- Asymmetric Information -- Agency Theory -- G34 -- D82 -- G30 -- G32; Financial services industry -- Periodicals; Securities industry -- Periodicals; Financial instruments -- Periodicals; Financial institutions -- Periodicals; 332.105
• DOI: 10.1111/fmii.12026
• Languages: English
• ISSNs: 0963-8008

Abstract

Abstract : This paper explores the relation between corporate governance and asymmetric information. We find that proxies for governance mechanisms that encourage the monitoring of managers are inversely related to proxies for asymmetric information. Specifically, greater board independence, board activeness and debt financing are significantly and inversely related to the degree of asymmetric information as reflected in bid‐ask spreads, volatility of share returns, normalised share trade volumes and market value of shares traded. This implies that corporate governance mechanisms that enhance managerial monitoring lead to improvements in the informational environment of the firm.