Investor Competition and the Pricing of Information Asymmetry
نویسندگان
چکیده
Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. In this paper, we study the role of competition among informed investors on the pricing of information asymmetry and its implications for the pricing of information quality. Relying on theories on competition among informed investors and on the pricing of information asymmetry, we hypothesize and find that the pricing of information asymmetry and the pricing information quality decrease with more competition among informed investors. Our results suggest that competition among informed investors has an important effect on how the information environment affects the cost of capital. First draft: September 2008 Current version: November 2009 JEL classification: G12, G14
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Investor Competition Over Information and the Pricing of Information Asymmetry
Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. Relying on theories about competition between informed investors as well as the pricing of information asymmetry, we hypothesize a cross-sectional variation in the pricing of information asymmetry that is conditional on competition. We develop and validate empirical prox...
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