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Internal information asymmetry and power distance

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  • Ni, Yingzhao
  • Ding, Wenjie
  • Li, Donghui
  • Xing, Lu

Abstract

Using the difference in insider trading profitability between top and lower-level managers to proxy for firms’ internal information asymmetry, we show that power distance increases internal information asymmetry in an international sample of 10,103 firms across 22 economies from 2003 to 2018. Furthermore, we find that this positive impact is lessened for firms with less complexity, more female directors on board, or an internal CEO promoted from within the firm. Moreover, we show that a country’s high-quality formal institutions lessen the role that a country’s culture of power distance plays in escalating internal information asymmetry. Our main conclusions remain valid after taking into account robustness and endogeneity issues.

Suggested Citation

  • Ni, Yingzhao & Ding, Wenjie & Li, Donghui & Xing, Lu, 2024. "Internal information asymmetry and power distance," Research in International Business and Finance, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:riibaf:v:71:y:2024:i:c:s0275531924002708
    DOI: 10.1016/j.ribaf.2024.102477
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    Cited by:

    1. Chuan Zhang & Yueyun Wang, 2024. "Non-financial information farsightedness and capital market information efficiency," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-19, December.
    2. Ettalibi, Nouhaila & Arunachalam, Murugesh & Nguyen, Thao & Rehman, Kashif ur, 2025. "The influence of institutional void and socio-cultural factors on the internationalization of emerging multinationals," Research in International Business and Finance, Elsevier, vol. 73(PA).

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    More about this item

    Keywords

    National culture; Power distance; Internal information asymmetry; Insider trading;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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