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Some Aspects of Information Asymmetry and its Effect on the Cost of Capital

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  • Alexandra Yancheva

    (University of Economics - Varna)

Abstract

Information asymmetry of capital markets is observed on two levels of the market relations between the participants - between investors themselves and between investors and managers. The probability of informed trading is underlying the occurring asymmetry. Identification of the liaison between disclosure and information asymmetry is a transitive step to the review of the impact of information asymmetry on the corporate cost of capital. To evaluate the effect of the first two factors different correlations may be used; this specific research reviews liquidity of securities and estimation risk, which affect the corporate cost of capital.

Suggested Citation

  • Alexandra Yancheva, 2018. "Some Aspects of Information Asymmetry and its Effect on the Cost of Capital," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, vol. 7(3), pages 140-148, December.
    • Handle: RePEc:vra:journl:v:7:y:2018:i:3:p:140-148
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    File URL: http://www.su-varna.org/izdanij/2018/EconomicSciencesSeries_2018_3/140-148.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    information asymmetry; disclosure; informed trading; cost of capital; liquidity; estimation risk;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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