Financial Development and Asymmetric Information

46 Pages Posted: 6 Mar 2008

See all articles by Angelos A. Antzoulatos

Angelos A. Antzoulatos

University of Piraeus - Department of Banking and Financial Management

Chris Tsoumas

Hellenic Open University

Dimitris Kyriazis

University of Piraeus - Department of Banking and Financial Management

Multiple version iconThere are 2 versions of this paper

Date Written: February 29, 2008

Abstract

We test the hypothesis that the degree of asymmetric information should decrease as financial systems develop, in a panel co-integration framework with annual data for 32 countries. To this end, we extend Barron et al.'s (1998) model to derive a measure of analysts' consensus that takes into account biases and herding in their forecasts. We calculate this measure, which is negatively related to asymmetric information, at the country level, with data from the I/B/E/S Global Aggregates database. In addition, we proxy financial development with the extensive set of indices found in the Word Bank's Financial Development and Structure database. Consistent with expectations, and despite the substantial differences across countries in terms of financial development and the quality of the institutional framework, the measure of analysts' consensus is positively related to indices proxying for the development of the financial system.

Keywords: Asymmetric Information, Analysts` Forecasts, Financial Development

JEL Classification: D82, G14, G20

Suggested Citation

Antzoulatos, Angelos A. and Tsoumas, Chris and Kyriazis, Dimitris, Financial Development and Asymmetric Information (February 29, 2008). Available at SSRN: https://ssrn.com/abstract=1100032 or http://dx.doi.org/10.2139/ssrn.1100032

Angelos A. Antzoulatos (Contact Author)

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

Chris Tsoumas

Hellenic Open University ( email )

Parodos Aristotelous 18
26335 Patra
Greece

HOME PAGE: http://www.eap.gr/index_en.php

Dimitris Kyriazis

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

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