Management earnings forecasts,insider trading,and information asymmetry

We investigate whether senior officers use accrual-based earnings management to meet voluntary earnings disclosure (i.e., management earnings forecasts) before selling or buying their own shares when they have private information. This study is the first to use the differences in timing of trades by senior officers and other insiders (e.g., directors or large shareholders) to infer information asymmetry. We hypothesize that the timing of senior officers' trades with no other insiders' trades at the same time indicates opportunistic trades and asymmetric information between senior officers and other insiders. Our results show that senior officers' exclusive sales are negatively associated with future returns, indicating that they tend to use insider information. Moreover, senior officers are more likely to meet their earnings forecasts when they plan to sell stocks.     

Analyst talent,information, and insider trading

We examine 1984–2018 data and show that the talent or ability of sell-side financial analysts affects a covered firm's information environment—more so than the simple number of analysts covering a firm. We find that while analysts in general produce market and industry-level information, high-ability analysts contribute more firm-specific information. Firms covered by high-ability analysts experience significantly less insider trading prior to positive earnings news. Results only reside in opportunistic (not routine) trades. When an analyst initiates (terminates) coverage we find decreased (increased) subsequent insider trading. Both changes are primarily driven by analyst talent. Analyst ability also negatively relates to insider trading profitability.     

Audit process,private information,and insider trading

Review of Accounting Studies - While the shareholder benefits of audits are well documented, evidence on whether audits can facilitate opportunistic behavior by corporate insiders is scarce. In...     

Insider-trading,discretionary accruals and information asymmetry

Using US data for the period from 2004 to 2012 and alternative discretionary accruals measures, we examine whether insiders manipulate earnings in an asymmetric information environment to profit from their informed trades, and whether the intervening information environment influences the relationship between earnings management and insider trading. We show that insider trading dominated by sell trades has a positive association with discretionary accruals. The incremental effect of information asymmetry as well as the interaction with insider trading is also prevalent in this relation, confirming the moderating effect of asymmetric information. Further, we show that the active involvement of some key insiders in high discretionary accruals is for personal benefit more in growth firms than in value firms. Our results also suggest that earnings management allows for insiders’ opportunistic, rather than routine, buy and sell trades. Our findings highlight that regulators should oversee and scrutinise both insider trading and earnings management to mitigate the risk of the opportunistic behaviour of insiders to avoid future corporate scandals.     

Equilibrium model with default and dynamic insider information

We consider an equilibrium model à la Kyle–Back for a defaultable claim issued by a given firm. In such a market the insider observes continuously in time the value of the firm, which is unobservable by the market makers. Using the construction in Campi et al. (http://hal.archives-ouvertes.fr/hal-00534273/en/, 2011) of a dynamic three-dimensional Bessel bridge, we provide the equilibrium price and the insider’s optimal strategy. As in Campi and Çetin (Finance Stoch. 11:591–602, 2007), the information released by the insider while trading optimally makes the default time predictable in the market’s view at the equilibrium. We conclude the paper by comparing the insider’s expected profits in the static and dynamic private information case. We also compute explicitly the value of the insider’s information in the special cases of a defaultable stock and a bond.     

Experience, information asymmetry, and rational forecast bias

This study examines whether it is ever rational for analysts to post biased estimates and how information asymmetry and analyst experience factor into the decision. Using a construct where analysts wish to minimize their forecasting error, we model forecasted earnings when analysts combine private information with consensus estimates to determine the optimal forecast bias, i.e., the deviation from the consensus. We show that the analyst??s rational bias increases with information asymmetry, but is concavely related with experience. Novice analysts post estimates similar to the consensus but as they become more experienced and develop private information channels, their estimates become biased and deviated from the consensus. Highly seasoned analysts, who have superior analytical skills and valuable relationships, need not post biased forecasts.     

Investor relations,information asymmetry and market value

Evidence to date on the market value of investor relations (IR) strategies is limited. We test the market relevance of IR activity directly employing a proprietary database measuring IR quality across all firms listed on NYSE, Amex and NASDAQ. Although, in theory, ‘repackaging’ and communicating existing information should have no market impact, we find that firms with higher quality IR strategies are rewarded with significantly higher valuation multiples. In addition, increase in IR quality is associated with increases in analyst following and liquidity. Overall, our findings are generally stronger for small firms which are more likely to be ‘neglected’. Our evidence is consistent with effective IR successfully raising firm visibility leading to enhanced recognition and reduced information asymmetry in line with Merton (1987 Merton, R., 1987. A simple model of capital market equilibrium with incomplete information. Journal of Finance, 42 (3), 483–510. doi: 10.1111/j.1540-6261.1987.tb04565.x[Crossref], [Web of Science ®] , [Google Scholar]) and thus ‘fairer’ firm valuation as argued by IR professionals.     

The pecking order,debt capacity,and information asymmetry

We quantify the empirical relevance of the pecking order hypothesis using a novel empirical model and testing strategy that addresses statistical power concerns with previous tests. While the classificatory ability of the pecking order varies significantly depending on whether one interprets the hypothesis in a strict or liberal (e.g., “modified” pecking order) manner, the pecking order is never able to accurately classify more than half of the observed financing decisions. However, when we expand the model to incorporate factors typically attributed to alternative theories, the predictive accuracy of the model increases dramatically—accurately classifying over 80% of the observed debt and equity issuances. Finally, we show that what little pecking order behavior can be found in the data is driven more by incentive conflicts, as opposed to information asymmetry.     

Disclosure frequency and information asymmetry

The main purpose of this paper is to investigate whether more frequent disclosure by firms is associated with lower levels of information asymmetry among investors. Using a panel of 386 firms in the US retail sector, I find that the practice of regularly providing monthly revenue disclosures is not associated with reduced information asymmetry. In contrast, I find that more detailed (greater quantity) disclosure is associated with reduced information asymmetry. I provide preliminary evidence that the distinction between disclosure frequency and disclosure quantity is due to more frequent disclosure providing an incentive for increased private information acquisition by sophisticated investors. The results indicate that the relation between disclosure and information asymmetry is multi-dimensional and varies depending on the disclosure attribute being studied.     

ESO compensation: The roles of default risk, employee sentiment, and insider information

This paper derives a pricing model for employee stock options (ESO) that includes default risk and considers employee sentiment. Using ESO data from 1992 to 2004, the study finds that the average executive's subjective value is about 55% of the Black-Scholes value. Only employees who over-estimate firm returns (or insiders who know that the firm is under-valued) by about 10% per annum will prefer ESOs over cash compensation. Our model also shows that work incentives offered by ESOs may be far lower than those implied by Black-Scholes but that ESOs may induce less risk-taking behavior, contrary to typical moral hazard arguments. Findings may impact relevant accounting regulations as well as compensation decisions.     

Accounting irregularities,management compensation structure and information asymmetry

The discovery of accounting irregularities is an important negative event for a company. The restatement resulting from the irregularity represents an average of 364 per cent of net income for the 152‐firm sample and the irregularities are predominantly revenue enhancing. The irregularity firms exhibit both lower transparency and visibility compared to a matched sample of non‐irregularity firms. Furthermore, prior to the announcement, these firms experienced poorer operating performance and their executive compensation structure is found to be significantly more equity‐based. Therefore, firms that have greater opportunity and incentive are shown to be more likely to commit accounting irregularities.     

Institutional investors' site visits,information asymmetry,and investment efficiency

Based on data from Shenzhen A-share listed companies from 2012 to 2017, this paper studies the relationship between institutional investors' site visits (SVs) and corporate investment efficiency and its intrinsic transmission mechanism. Institutional site visits (SVs) can effectively mitigate firms' underinvestment, but it has no significant inhibitory effect on overinvestment. The conclusion still holds after using the instrumental variables and alternative measurements of investment efficiency. Mechanism analysis finds that site visits can alleviate underinvestment by reducing information asymmetry. We further document that the impacts are more pronounced for brokerages, funds, and private equity firms, firms with higher levels of internal governance, and firms' regions with better marketization. Our study suggests that institutional SVs mainly contribute to mitigating underinvestment rather than inhibiting overinvestment. This study provides practical insights for regulating corporate investment decision-making and is of significant practical significance for promoting the healthy development of enterprises.     

Information uncertainty,information asymmetry and corporate bond yield spreads

This study examines the effects of information uncertainty and information asymmetry on corporate bond yield spreads using American data from 2001 to 2006. Empirical results of this study show that investors charge a significant risk premium for both information uncertainty and information asymmetry when controlling for variables well known in the literature. The results are robust even when controlling for credit ratings. Finally, information uncertainty and asymmetry help structural-form credit models explain the yield spreads of bonds with short maturities.     

交友：获取内幕信息的合法手段

法官判案不仅需要适用法律（美国法官有时还制定法律），还必须说明事情是非曲折，即，法律之外的情理；仅凭法律分析难以服众，法官判案需要道德权威。     

Ownership concentration, voluntary disclosures and information asymmetry in New Zealand

This paper investigates the impact of different classes of ownership concentration on information asymmetry conditional upon corporate voluntary disclosures in New Zealand. The current paper attempts to extend this stream of research by incorporating three mutually exclusive ownership structures and considering the interactive relationship between such ownership structures and corporate voluntary disclosures. Results reveal that ownership concentration in general is significantly positively associated with bid-ask spreads (proxy for information asymmetry) observed around annual report release dates. This finding supports the adverse selection hypothesis and importantly this effect is found to be most pronounced for financial institutions and management-controlled ownership categories. When voluntary disclosure is taken into account, the findings demonstrate that disclosures significantly attenuate information asymmetry risk associated with ownership concentration. This effect is particularly pronounced for firms with management-controlled ownership structures. The findings highlight the importance of corporate disclosures under concentrated ownership structures especially management-controlled ownership structures in reducing information asymmetry and enhancing market efficiency in New Zealand.     

Audit quality and information asymmetry between traders

In this study, we investigate the association between audit quality and information asymmetry between informed and uninformed traders. We employ three proxies for information asymmetry – absolute price differences, absolute volatility differences, and absolute differences in the long/short ratio of trades – between US stock and options markets and represent audit quality through the appointment of Big n and industry specialist auditors. For a sample of 4062 firm‐years between 2002 to 2005, our results indicate that the appointment of Big n and industry specialist auditors is associated with lower information asymmetry measures. Our results are consistent with audit quality playing a role in the quality of financial reporting information and flowing through to the allocation of information among traders.     

Voluntary disclosure and information asymmetry in Denmark

This paper examines if the level of voluntary disclosure affects information asymmetry for industrial companies listed on the Copenhagen Stock Exchange. Economic theory suggests that disclosing more information should lower the information asymmetry component of a firm's cost of capital [Leuz, C., & Verrecchia, R. E. (2000)]. The results indicate that voluntary disclosure is negatively associated with proxies for information asymmetry. The results are robust even after controlling for various firm characteristics introduced in related literature. Despite differences in institutional settings the findings in our paper are similar to the ones based on US data.