Information Asymmetry in Stock Trading, Economic and Financial Characteristics and Corporate Governance in the Brazilian Stock Market

Accounting & Finance Review, Forthcoming

13 Pages Posted: 23 May 2014

See all articles by Orleans Silva Martins

Orleans Silva Martins

Federal University of Paraiba

Edilson Paulo

Federal University of Paraiba

Date Written: April 30, 2014

Abstract

This study sought to investigate the relationship between information asymmetry in the stock trading, economic and financial characteristics and corporate governance of listed companies in the Brazilian stock market in 2010 and 2011. To this end, the study relied on a theoretical framework for information asymmetry in the capital market to measure the asymmetry’s magnitude based on the intraday stock-trading data of 194 companies. The primary results demonstrated that the informational asymmetry in the stock trading was positively related to the risk, return and liquidity of the shares as well as the cost of equity and the size of the companies. In addition, the asymmetry was negatively related to the abnormal return of shares. During the investigated period, the information asymmetry relationship with the liquidity and size (positive) and the abnormal return (negative) were at odds with previous research. The reasons for our results may be related to specific aspects of the Brazilian market, for example, in the case of abnormal returns, the deceleration of the Bovespa Index (IBovespa) or the reflection of the average return to negotiators without insider information during the period. In case of liquidity and size, the high index of issuance and negotiation of preferred shares may have influenced the results. Thus, this research contributes to the analysis of idiosyncratic characteristics of the capital market of a developing country, such as information asymmetry in stock trading and its association with the economic and financial characteristics and corporate governance of companies in the Brazilian stock market.

Keywords: Insider information. Insider trading. Capital market.

JEL Classification: G3. G34. M4. M41.

Suggested Citation

Martins, Orleans Silva and Paulo, Edilson, Information Asymmetry in Stock Trading, Economic and Financial Characteristics and Corporate Governance in the Brazilian Stock Market (April 30, 2014). Accounting & Finance Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2439864

Orleans Silva Martins (Contact Author)

Federal University of Paraiba ( email )

Department of Finance and Accounting
João Pessoa, Paraíba
Brazil

HOME PAGE: http://lattes.cnpq.br/5012236039984008

Edilson Paulo

Federal University of Paraiba ( email )

João Pessoa, Paraiba 58038-382
Brazil

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