Abstract

http://ssrn.com/abstract=1082589
 
 

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Information Asymmetry and Corporate Governance


Jie Cai


Drexel University

Yiming Qian


University of Iowa - Department of Finance

Yixin Liu


University of New Hampshire

Miaomiao Yu


University of Saskatchewan - Edwards School of Business

January 30, 2015

Forthcoming at Quarterly Journal of Finance

Abstract:     
We examine the impact of a firm’s asymmetric information on its choice of three mechanisms of corporate governance: the intensity of board monitoring, the exposure to market discipline, and CEO pay-for-performance sensitivity. We find that firms facing greater asymmetric information tend to use less intensive board monitoring but rely more on market discipline and CEO incentive alignment. These results are consistent with the monitoring cost hypothesis. In addition, we find that high information-asymmetry firms that have to substantially increase board monitoring intensity after Sarbanes-Oxley Act suffer poor stock performance. Our evidence therefore suggests that regulators should use caution when imposing uniform corporate governance requirements on all firms.

Number of Pages in PDF File: 38

Keywords: corporate governance, asymmetric information, board monitoring, pay-for performance, anti-takeover provisions

JEL Classification: D82, J33, G30, G32, G38


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Date posted: March 21, 2008 ; Last revised: February 2, 2016

Suggested Citation

Cai, Jie and Qian, Yiming and Liu, Yixin and Yu, Miaomiao, Information Asymmetry and Corporate Governance (January 30, 2015). Forthcoming at Quarterly Journal of Finance. Available at SSRN: http://ssrn.com/abstract=1082589 or http://dx.doi.org/10.2139/ssrn.1082589

Contact Information

Jie Cai (Contact Author)
Drexel University ( email )
LeBow College of Business
Philadelphia, PA 19104
United States
215-895-1755 (Phone)
215-895-2955 (Fax)
HOME PAGE: http://faculty.lebow.drexel.edu/CaiJ/
Yiming Qian
University of Iowa - Department of Finance ( email )
S382 Pappajohn Building
Iowa City, IA 52242
United States
319-335-0934 (Phone)
319-335-3690 (Fax)
Yixin Liu
University of New Hampshire ( email )
Durham, NH 03824
United States
603-862-3357 (Phone)
Miaomiao Yu
University of Saskatchewan - Edwards School of Business ( email )
Saskatoon, Saskatchewan S7N 5A7
Canada
(306) 966-5129 (Phone)
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