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Corporate governance and information asymmetry between managers and investors

Corporate governance and information asymmetry between managers and investors Purpose – The purpose of this paper is to investigate the impact of governance on information asymmetry between managers and investors. Hence, the paper seeks to extend prior voluntary disclosure research. Design/methodology/approach – The paper investigates how a firm's governance maps into the level of information asymmetry between managers and investors. Governance encompasses two complementary dimensions: formal monitoring attributes and voluntary disclosure about board processes. Information asymmetry is measured by either share price volatility or Tobin's Q. Findings – The results show that some formal monitoring attributes (board and audit committee size) as well as the extent of voluntary governance disclosure reduce information asymmetry. This suggests that governance disclosure may complement a firm's governance monitoring attributes, especially in a country such as Canada where investors have good legal protection. It appears also that firms take into account ultimate costs and benefits to shareholders when determining their governance disclosure. Originality/value – To the best of the authors' knowledge, this study is the first to investigate the impact of voluntary governance disclosure on information asymmetry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Emerald Publishing

Corporate governance and information asymmetry between managers and investors

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References (92)

Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1472-0701
DOI
10.1108/14720701011085553
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to investigate the impact of governance on information asymmetry between managers and investors. Hence, the paper seeks to extend prior voluntary disclosure research. Design/methodology/approach – The paper investigates how a firm's governance maps into the level of information asymmetry between managers and investors. Governance encompasses two complementary dimensions: formal monitoring attributes and voluntary disclosure about board processes. Information asymmetry is measured by either share price volatility or Tobin's Q. Findings – The results show that some formal monitoring attributes (board and audit committee size) as well as the extent of voluntary governance disclosure reduce information asymmetry. This suggests that governance disclosure may complement a firm's governance monitoring attributes, especially in a country such as Canada where investors have good legal protection. It appears also that firms take into account ultimate costs and benefits to shareholders when determining their governance disclosure. Originality/value – To the best of the authors' knowledge, this study is the first to investigate the impact of voluntary governance disclosure on information asymmetry.

Journal

Corporate GovernanceEmerald Publishing

Published: Oct 19, 2010

Keywords: Corporate governance; Disclosure; Information control; Information transfer; Canada

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