Abstract

http://ssrn.com/abstract=1769905
 
 

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Investor Competition Over Information and the Pricing of Information Asymmetry


Brian Akins


Rice University - Jesse H. Jones Graduate School of Business

Jeffrey Ng


Singapore Management University - School of Accountancy

Rodrigo S. Verdi


Massachusetts Institute of Technology (MIT)

June 6, 2011

The Accounting Review, Forthcoming

Abstract:     
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.

Number of Pages in PDF File: 43

Keywords: Information Risk, Information Quality, Asset Pricing

JEL Classification: G12, G14

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Date posted: February 27, 2011 ; Last revised: April 18, 2013

Suggested Citation

Akins, Brian and Ng, Jeffrey and Verdi, Rodrigo S., Investor Competition Over Information and the Pricing of Information Asymmetry (June 6, 2011). The Accounting Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1769905 or http://dx.doi.org/10.2139/ssrn.1769905

Contact Information

Brian K. Akins
Rice University - Jesse H. Jones Graduate School of Business ( email )
6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States
Jeffrey Ng
Singapore Management University - School of Accountancy ( email )
60 Stamford Road
Room 4008
Singapore, 178900
Singapore
+6568280543 (Phone)

Rodrigo S. Verdi (Contact Author)
Massachusetts Institute of Technology (MIT) ( email )
Sloan School of Management
100 Main Street E62-679
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)
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