Inequality of information and the value of firms

Satrio, Arif Budi; Saleh, M.Soc.Sc Samsubar; Wendy, N.A.

doi:10.1504/ijbaaf.2022.126159

Cited by 1 publication

(3 citation statements)

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“…This is true even in the 4.0 era (Thing et al 2021). Recent studies in Indonesia (Satrio 2021;Satrio et al 2022) show that this problem of asymmetric information causes public confusion in assessing companies. However, will asymmetric information automatically influence the company's funding decision-making?…”

Section: Literature Review Asymmetric Information and Financing Decis...mentioning

confidence: 99%

“…The existence of asymmetric information indicated by the availability of special information for the insider (Jaffe 1974) causes market failures in determining the price of company assets both in developed markets (Fosu et al 2016) and in developing countries (Huynh et al 2020;Satrio et al 2022). Asymmetric information can cause management to adjust funding decisions.…”

Section: Introductionmentioning

confidence: 99%

“…Investigating asymmetric information on funding decisions is essential in Indonesia, a developing country, with at least two considerations. First, public companies in Asia typically have low disclosure quality and transparency (Claessens & Fan 2002), and Indonesia is no exception; this is indicated by high asymmetric information (Satrio 2021;Satrio et al 2022). This is exacerbated by conditions in Indonesia as a civil law adherent with weak investor protection characteristics (Darmadi & Sodikin 2013).…”

Section: Introductionmentioning

confidence: 99%

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Financing Decisions: Is the Quality of Information Still Relevant to be Considered?

2022

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Information asymmetry makes it difficult for company management to make decisions regarding funding sources. This study aims to investigate and explain the behaviour of company management when faced with asymmetric information problems. Data on 459 companies in Indonesia during the 2005-2019 period are surveyed in an attempt to provide the latest evidence regarding this issue. Investigations using the fixed-effect model approach and dynamic two-step system generalised method of moments are carried out using preliminary and robustness tests. The results show that in addition to company-specific factors, the problem of asymmetric information is an important factor considered by management in determining funding sources. The worsening information gap has led companies to increasingly use external funding from borrowing instead of adding additional funding sources from equity issuance (confirming the pecking order theory). Robust results in this study will be of use to regulators and enrich the literature related to corporate funding decisions in developing countries.

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Section: Literature Review Asymmetric Information and Financing Decis...mentioning

confidence: 99%