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Governance Quality and Information Asymmetry

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  • Ahmed Elbadry
  • Dimitrios Gounopoulos
  • Frank Skinner

Abstract

This paper explores the relation between corporate governance and asymmetric information. We find that proxies for governance mechanisms that encourage the monitoring of managers are inversely related to proxies for asymmetric information. Specifically, greater board independence, board activeness and debt financing are significantly and inversely related to the degree of asymmetric information as reflected in bid‐ask spreads, volatility of share returns, normalised share trade volumes and market value of shares traded. This implies that corporate governance mechanisms that enhance managerial monitoring lead to improvements in the informational environment of the firm.

Suggested Citation

  • Ahmed Elbadry & Dimitrios Gounopoulos & Frank Skinner, 2015. "Governance Quality and Information Asymmetry," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 24(2-3), pages 127-157, May.
    • Handle: RePEc:wly:finmar:v:24:y:2015:i:2-3:p:127-157
    DOI: 10.1111/fmii.12026
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