Firm opacity and financial market information asymmetry

Ravi, Rahul; Hong, Youna

doi:10.1016/j.jempfin.2013.11.007

Cited by 37 publications

(17 citation statements)

References 55 publications

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“…These seemingly contradictory results suggest that the relationship between firmto-investor information asymmetry and inter-investor information asymmetry cannot be monotonic. In an attempt to explain the contradiction, Ravi and Hong (2012) propose a unimodal relation between the two types of information asymmetry. They find that the inter-investor information asymmetry increases, and then declines, as the firm-to-investor information asymmetry decreases from absolutely opaque situations to perfectly transparent situations.…”

Section: Introductionmentioning

confidence: 99%

Information asymmetry around S&P 500 index changes

Ravi

Hong

2015

Review of Accounting and Finance

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We examine the effects of S&P 500 index composition changes on the trading environment from 2001 to 2010. We find that the adverse selection cost of trading significantly decreases post addition and increases post deletion. However, the intraday price dynamics of additions to the index seem to be distinct from those of deletions from the index. The event period cumulative abnormal returns for additions are significantly associated with the change in the adverse selection cost of trading while this association is non-significant for deletions. However, the cumulative abnormal returns for deletion event periods are found to be significantly associated with the change in realized spreads. Realized spreads may be interpreted as a measure of revenue earned by the liquidity providers in the market.

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Section: Introductionmentioning

confidence: 99%

Information asymmetry around S&P 500 index changes

Ravi

Hong

2015

Review of Accounting and Finance

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“…A voluminous literature addresses information asymmetries in markets wherein heterogeneous information sets enable sophisticated or informed traders to outperform relatively uninformed traders (Grossman and Stiglitz, ; Hellwig, ; Kyle, ). Thus, the informational environment of a stock is an important factor in determining its liquidity (Healy and Palepu, ; Ravi and Hong, ). More opaque firms, where the information environment is not as transparent, have larger bid‐ask spreads.…”

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confidence: 99%

Executive Network Centrality and Stock Liquidity

Egginton¹,

McCumber

2018

Financial Management

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We examine the relationship between stock market liquidity and the network centrality of firm executives. We find that firms whose executive officers are more central in the network of executives have narrower bid‐ask spreads. We use an exogenous network centrality shock of executive turnover and report that liquidity improves after firms hire executives with greater centrality. We present evidence that improved liquidity is attributable to efficient information flows around executives in more advantageous network positions.

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“…In building the conceptual framework for SMME lending, we borrow information from the asymmetric information theory (Stiglitz & Weiss 1981), and advance the fact that lending to SMMEs hinges on lending technologies used, which in turn are subject to the level of information available to the potential lender (Allen 2016;Butler, Kraft & Weiss 2007;Mac et al 2016;Mullen 2012;Ravi & Hong 2014). From that analogy, we propose that credit rationing is a function of the costs and benefits associated with each type of lending technology.…”

Section: Data and Research Designmentioning

confidence: 99%

Small, micro and medium enterprises financing: Costs and benefits of lending technologies in the Eastern Cape province of South Africa

Mbedzi¹,

Simatele²

2020

J. econ. financ. sci.

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Orientation: As lack of access to credit hinders small, micro and medium enterprises (SMMEs) success and lending technologies being conduits transmit credit access, more focus must be on the effect of lending technologies on credit rationing.Research purpose: To analyse the extent of credit rationing amongst SMMEs based on lender and firm characteristics.Motivation for the study: In South Africa, SMMEs are funded by different lenders using different lending technologies, but little is known about which ones are more effective.Research approach/design and method: The study takes a quantitative approach. In this study, 321 SMMEs are sampled from 1486 small businesses on the registers of the Nelson Mandela Bay Business Chamber and the Border-Kei Chamber of Business in the Eastern Cape province of South Africa. Financing of SMMEs is captured with a categorical credit-rationing variable. Accordingly, a logit technique is used. The first model captures credit rationing as a binary variable. In the second model, the nature of credit rationing is disaggregated resulting in a four-measure categorical variable.Main findings: Little rationing occurs when asset-based and venture capital methods are used. Microfinance and privately owned development financial institutions have high rationing levels, similar to commercial banks, defeating the purpose of their special existence to address excluded groups. Black people-owned and female-owned businesses are the most rationed. Credit rationing decreases with firm size, but the effects are amplified by race.Practical/managerial implications: To improve SMMEs access to finance, the government should focus on allocating funds to firms using SMMEs’ credit rationing risk profiles.Contribution/value-add: Lending technology, lender type and SMME characteristics relationships indicate that SMMEs can benefit from a well-understood rationing risk profile of firms in the economy. Therefore, policies on support and regulation of the distribution of loan portfolios aligned to empirical rationing risk profiles can improve SMME growth. However, this study has used SMME data from the Eastern Cape province only, one of the nine provinces in South Africa. Thus, the provincial heterogeneity effects are not captured in this study.

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Firm opacity and financial market information asymmetry

Cited by 37 publications

References 55 publications

Information asymmetry around S&P 500 index changes

Information asymmetry around S&P 500 index changes

Executive Network Centrality and Stock Liquidity

Small, micro and medium enterprises financing: Costs and benefits of lending technologies in the Eastern Cape province of South Africa

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