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Measuring Information Asymmetry In Large Active Firms On The Tehran Stock Exchange

Author

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  • Mostafa SHAMSODDINI
  • Mohammad N. SHAHIKI TASHCA
  • Farhad KHODADAD-KASHI

Abstract

In financial markets, transparency of financial information is one of the most effective variables of investment strategies. Information asymmetry can seriously affect firm performance on the stock exchange and firms with a poor informational environment can lose the interest of investors. Reducing information asymmetry can have an important effect on firm performance on the stock exchange. Firms may lack a clear informational environment in the market because of the emerging conditions governing the Tehran Stock Exchange. Because larger and more active firms on the Tehran Stock Exchange provide more information, measuring the informational environment of these firms provides an overview of information asymmetry. The present study calculated the information asymmetry in these firms using the PIN and FE indices. The inconsistent results provided by these indices prompted the authors to offer a new index that is a composite of the PIN and FE that can better explain information asymmetry in developing market such as Asian stock markets. The results show that the new composite index, by using the mechanisms of the PIN and FE indices, provides a better outcome. The new composite index shows that the Tosee Melli Inv (TMEL1), Mobarakeh Steel (FOLD1), Iran Mobil Tele (HMRZ1), Saipa (SIPA1) and I.N.C. Ind. (MSMI1) firms have a better informational environment on the Tehran Stock Exchange. JEL Codes - D82, D83

Suggested Citation

  • Mostafa SHAMSODDINI & Mohammad N. SHAHIKI TASHCA & Farhad KHODADAD-KASHI, 2016. "Measuring Information Asymmetry In Large Active Firms On The Tehran Stock Exchange," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 63(3), pages 333-346, November.
    • Handle: RePEc:aic:saebjn:v:63:y:2016:i:3:p:333-346:n:41
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    References listed on IDEAS

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    More about this item

    Keywords

    Information asymmetry; Tehran Stock Exchange; Composite index; PIN; FE;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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