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Information Asymmetry and Economic Policy Uncertainty

48 Pages Posted: 22 Sep 2016 Last revised: 19 Sep 2017

Venky Nagar

University of Michigan, Stephen M. Ross School of Business

Jordan Schoenfeld

University of Utah

Laura Wellman

University of Utah - David Eccles School of Business

Date Written: September 18, 2017

Abstract

This study examines whether economic policy uncertainty (EPU) exacerbates information asymmetry among investors. We find that increased EPU is associated with decreased stock liquidity, especially for firms more exposed to EPU. Increased EPU also lowers investors' reaction to earnings for firms with high liquidity risk. Management's voluntary disclosure only partly reverses the liquidity drop associated with increased EPU. These results suggest that information asymmetry is an important channel through which EPU affects asset pricing.

Keywords: Corporate Disclosure; Information Asymmetry; Policy Uncertainty; Stock Liquidity

JEL Classification: G12, G14, E61, E65

Suggested Citation

Nagar, Venky and Schoenfeld, Jordan and Wellman, Laura, Information Asymmetry and Economic Policy Uncertainty (September 18, 2017). Ross School of Business Paper No. 1333. Available at SSRN: https://ssrn.com/abstract=2841442 or http://dx.doi.org/10.2139/ssrn.2841442

Venky Nagar

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-3292 (Phone)
734-764-3146 (Fax)

Jordan Schoenfeld (Contact Author)

University of Utah ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States

Laura Wellman

University of Utah - David Eccles School of Business ( email )

1645 Campus Center Drive
Salt Lake City, UT 84112
United States

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