Governance Quality and Information Asymmetry
Financial Markets, Institutions and Instruments, 24, 2015, pp 127-157
38 Pages Posted: 2 Jan 2014 Last revised: 15 Apr 2015
Date Written: April 14, 2015
We examine the effect of corporate governance mechanisms on asymmetric information. Using a sample of 392 non-financial UK companies listed in the London Stock Exchange we find that board independence, performance related executive compensation, the number of insiders and leverage are significantly negatively related to asymmetric information whereas the percentage of insider ownership and block ownership are significantly positively related to asymmetric information. The results suggest that UK companies have a high degree of compliance with the combined code on corporate governance and as a result mitigate asymmetric information while contributing towards resolving agency problems.
Keywords: Corporate Governance Mechanisms, Asymmetric Information, Agency Theory
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