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Governance Quality and Information Asymmetry
Author(s) -
Elbadry Ahmed,
Gounopoulos Dimitrios,
Skinner Frank
Publication year - 2015
Publication title -
financial markets, institutions and instruments
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 23
eISSN - 1468-0416
pISSN - 0963-8008
DOI - 10.1111/fmii.12026
Subject(s) - information asymmetry , corporate governance , volatility (finance) , business , independence (probability theory) , debt , monetary economics , accounting , information quality , enterprise value , bid–ask spread , economics , finance , information system , statistics , mathematics , engineering , market liquidity , electrical engineering
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.