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...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
American Accounting Association
2011
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| Online Access: | http://hdl.handle.net/1721.1/67337 https://orcid.org/0000-0003-1231-7374 |
| Summary: | 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 proxies for competition using the number and concentration of
institutional investor ownership. Using these proxies, we find a lower pricing of information
asymmetry when there is more competition. Overall, our results suggest that competition
between informed investors has an important effect on how the information environment affects
the cost of capital. |
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