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Intra-industry sectors are producers of asymmetric information, which in turn has an impact on capital structure decisions. The purpose of this study was to determine (1) differences in debt-equity ratio, growth opportunities, firm age, and firm size as firm characteristics and (2) differences in the effect of growth opportunities, firm age, and firm size on the debt-equity ratio between manufacturing and nonmanufacturing firms. We collected 3,063 observation units consisting of 2,628 manufacturing sectors and 435 non-manufacturing sectors in the Indonesia Stock Exchange (IDX) and trimmed the data to eliminate the top and bottom 20%. Manufacturing firms are older and more stable, using their profitability to increase information disclosure. Although they produce lower asymmetric information, they do not prefer external financing as an effort to reduce intervention. In contrast, non-manufacturing firms have less tangible assets as a proportion of their total assets than manufacturing firms and therefore produce less asymmetric information of intrinsic value (tangible assets). As a result, manufacturing firms prefer debt issues over equity issues when financing new investments.

AbstractThis paper investigates the impact of firm leverage on its investment activities. Especially, the research is conducted in the context of the Vietnamese emerging market, an incomplete market in South East Asia with the existence of inefficient market problems such as information asymmetry and agency conflicts which are the root cause of the relationship between corporate leverage and investment. Regarding methodology, we build the two main types of econometric models: traditional multiple regression and multilevel model (also called hierarchical, mixed, or nested data model). The purpose of employing the multilevel model is to observe the hierarchical structure of data and the effect of each data level in the hierarchy on firm investment that the traditional regression model may fail to achieve. We construct three-level predictors (three levels of leverage) for investment: observation unit, firm level, and industry level. We find that debt used in a firm can harm or reduce its investment activities. All three hierarchical levels of leverage show negative and significant effects on investment. Especially, the impact of leverage at the first level of data clustering on investment gets stronger under the moderation of industry leverage. In this case, the multilevel model is a more appropriate estimation method than the traditional regression.

Purpose: To determine small and medium-sized enterprises’ (SMEs) perception related to their trade credit management effectiveness. Design/methodology/approach: Quantitative research design with purposive sampling as the sampling method, administrated to 10 450 SMEs within South Africa. Findings/results: The results indicate SMEs perceive their trade credit management as effective. Practical implications: The article reveals how SMEs perceive their trade credit management by identifying their effectiveness in managing trade credit. Originality/value: By raising awareness pertaining to SMEs’ perceptions around their trade credit management effectiveness, SMEs can become more observant of their own trade credit management effectiveness and overall finances. Thereby, SMEs’ awareness could be improved to become financially viable and, in so doing, empower SMEs to foster economic development within South Africa. Given the results revealing SMEs’ perception as effective in managing trade credit, the study adds value by providing insight as to what financial problems, apart from trade credit ineffectiveness, could contribute to their business failure. There is a need therefore to investigate why SMEs continue to fail at such high rates because of financial problems in order to determine the root causes and types of financial problems contributing to SME business failure.

The budget process plays a crucial role in the implementation of all the functions within small and medium-sized enterprises (SMEs), such as business, management, operation, manufacturing, etc. The results from this study, identifies that in the budget process the top-down approach of SMEs occupies 33.7%, and the bottom-up approach occupies 26.3%. Meanwhile, SMEs’ method for budget process is the "across approach" (participative), which resulted in 40%, this method is the most popular in comparison with others. Therefore, in the development of the budget process, it is vital to link all the sector functions within the SMEs, as this will facilitate the achievement of the nominated goals and objectives and provide higher-levels of performance. When management and employees work together to develop an effective budget, it improves the key outcomes and overall performance of SMEs. Furthermore, a unified participation approach to budget preparation process development ensures full cooperation and commitment for avoiding asymmetric information and achieving an effective budget process. This study offers academics and practitioners with essential insights for managing company performance, assisting SMEs in evolving as sustainable and competitive players in this new era.

In this study, we measured how people would take advantage of others’ misinformation, when the financial incentive size changes in economic games. We conducted a laboratory experiment based on game theory, using a modified version of the ultimatum game, where proposers had the opportunity to manipulate the responder’s beliefs by the use of ‘hide behind the small cake’ strategy. Our results contradict the selfish rationality model predictions. Intermediary financial incentives led people to adopt extremes strategies of pure fair/selfish allocation. Greater levels of financial incentive reduced the full expropriation strategy and at the same time, reduced the presence of fair offers, which suggests an interesting interaction between opportunism and psychological costs of lying. The results showed that opportunism is hugely context-dependent and people will update their decision regarding opportunism in accordance with the financial size incentive. Thus, the same person can behave differently depending on the financial value involved and will not necessarily be more selfish when the financial amount increases.

In this paper, we investigated the impact of financial leverage on investment decisions on a sample of 811 firms from ten emerging South-Eastern European countries (Bosnia and Herzegovina, Bulgaria, Montenegro, Croatia, Greece, Romania, North Macedonia, Slovenia, Serbia and Turkey). We apply a panel regression model involving investment ratio as a dependent variable, leverage as independent variable, and control for several firm characteristics that closely determines the corporate investments. The results of the analysis show that leverage is negatively related to investment in the companies in SEE. But only long term debt has a stronger negative impact on investment for firms with low growth opportunities than for firms with high growth opportunities. These findings show supportive evidence of agency theories of corporate leverage, especially with the debt overhang theory, but did not give strong validation that leverage has a disciplining role for firms with low growth opportunities in SEE emerging markets. In addition to leverage, we found that corporate investments in the SEE countries decrease significantly with tangibility and the company size. Corporate investments in the SEE countries increase significantly with cash flow, sales, non-debt tax shield and profitability. Overall, the results slightly defer with those from the research on the case of developed markets.

Purpose – This paper aims to examine the link between the corporate social responsibility (CSR) communication efforts of companies and their ability to obtain public procurement contracts. Design/methodology/approach – The authors are exploiting a database with the number of public procurement contracts won by SBF 120 companies in France and a constructed CSR index over the period of 2007–2015. The authors provide estimates of the amount of public contracts won by those companies. Findings – The results suggest a striking influence of CSR communication on the ability of firms to win contracts. Research limitations/implications – This study focused on the case of the SBF 120 companies under the French regulatory system and European directives, which are different from the obligations in North American countries. Second, our constructed CSR index may be too simplistic in nature, and its application is limited only to the French context. Third, we do not have any evidence about the efficiency of well-ranked firms in our study. CSR reporting is still considered to be a form of communication, even if formal, that can contain information that does not especially reflect reality, as the scandals of several companies have shown in recent years (e.g. Volkswagen, Eiffage, Enron). Practical implications – Companies should consider Business-to-Government (B-to-G) market when investing in CSR actions. Originality/value – This is one of the first empirical studies measuring the impact of CSR on the ability of companies to win public contracts. 本文擬透過研究商家到政府的市場，去探討公司的企業社會責任傳播能力與它們取得公共採購合約能力之間的關係。研究的方法是利用SBF 120間在法國的公司取得公共採購合約數目的數據庫，以及一個涵蓋2007年 至 2015年期間的構築CSR指數。研究結果顯示、在某一年，公司事先的企業社會責任的傳播，對其取得更多合約能力的影響至為驚人。

The theoretical model of a perfectly competitive market leads to the efficient allocation of resources, and one of the assumptions of that model is complete information of market participants. In reality, however, market participants are usually asymmetrically informed. The goal of this analysis is to point out the fact that asymmetric information is almost ubiquitous, and also to point out the consequences of asymmetric information and the possibility of their elimination or mitigation. In addition, the research aim also reflects in achieving a theoretical confirmation of the presence of such asymmetric information and its consequences on the labor market as well, and in an attempt to mathematically formalize such markets, especially the labor market, by modeling the method of calculating wages and the employer’s objective function as an opportunity to overcome the principal-agent problem. The precisely defined research goals determined the structure of the paper, as well as the methodological tools. In order to test and prove the defined research hypotheses in this study and to realize the defined research goals of the study, the methods of theoretical analysis, abstraction, comparison, concretization, generalization, and critical evaluation are used.

This study aims at examining the integration impact of the five ASEAN Islamic capital markets on asymmetric information for ASEAN Economic Community (AEC) development. Utilizing samples of market and financial panel data from 2009 to 2015 among the five ASEAN Islamic capital markets, and applying two-country portfolios of the Islamic capital markets among the five ASEAN countries to measure the different levels of Islamic capital market integration, this study suggests that the different levels of the Islamic capital market integration between Indonesia and Malaysia are found to result in asymmetric information negatively. The strongest Islamic capital market integration between Indonesia and Malaysia affect reduced asymmetric information more consistently than the other two-country portfolios, while the weakest level of integration between the Philippines and any other four Islamic capital markets that affects asymmetric information inconsistently is also supported. These results confirm an interplay between a modern portfolio theory, Efficient Market Hypothesis (EMH), contract theory, and general economic theory, and also provide new insights for stakeholders in investment decisions and strategies, cross-border regulation of economic resources, and other plentiful benefits.

This paper has the goal of analyzing the association between asymmetric information, measured by Corwin-Schultz bid ask spread estimator, and stock prices in the Brazilian stock market. Daily data from 64 corporations over a period of 10 years were examined using the Johansen-Fisher panel cointegration technique in order to assess the validity of asymmetric information measurements in shorter periods than in previous studies. The results indicate that asymmetric information anticipates stock prices over a period of up to two days in a theoretically consistent way. Future research may control the results via traditional finance variables.

The escalation of commitment process involves a decision-maker continuing commitment to an investment after receiving negative information. This study develops a principal-agent model to explore how escalation decisions are linked with departures of CEOs from the position. With asymmetric information, a CEO has an incentive to conceal prior decision errors by escalating commitment to failing investments and leaving the firm before the outcome of investment decisions is disclosed publicly. Results of empirical analysis based on a sample of over 3,000 US firms are consistent with the theory and demonstrate that firms’ reporting of low financial performance relative to their industry as well as initiation of new discontinued operations are preceded, and not followed, by unplanned CEO departures.

Access to quality healthcare is the primary purpose for which the National Health Insurance Scheme (NHIS) in Nigeria was introduced. It is believed that the introduction of the NHIS for workers will reduce their engagement in health-risk behavior. Despite the existence of the NHIS, its enrollees (i.e. insured workers) are still complaining of the poor healthcare delivery by the service providers. As a result, some of them are still engaging themselves in a detrimental health-risk behavior due to public health workers’ moral hazard and a short supply of drugs in public hospitals. This study was undertaken in Jos metropolis so as to ascertain the extent to which moral hazard and the disclosure of partial information about the NHIS lead to a health-risk behavior among civil servants. The research has shown a moderate level of the moral hazard demonstrated by the NHIS service providers since, within the measurement range from 1 to 7, the overall average significantly falls to 4. Contrary to the moderate moral hazard demonstrated by the NHIS service providers, the majority of the NHIS enrollees were found to averagely demonstrate a low health-risk behavior.

This research is an explanatory and correlational study using survey method on heads of division in Regional Organizations of Banyumas Regency. This research aims to find out the effect of asymmetric information on the creation of budgetary slack and the effect of ethical factors expressed by person-situation interactionist factors on that relationship. The research population are all Regional Organizations of Banyumas Regency. The sampling method used is judgment sampling and it obtains 25 regional organizations. There are 4 heads of divisions from each regional organization who become the respondents. Based on the research result and data analysis using moderated regression analysis, it concludes: Asymmetric information can increase the creation of budgetary slack; (2) Ethical ideology does not moderate the effect of asymmetric information on the creation of budgetary slack; (3) Machiavellian character does not moderate the effect of asymmetric information on the creation of budgetary slack; (4) Locus of control does not moderate the effect of asymmetric information on the creation of budgetary slack; (5) Moral intensity does not moderate the effect of asymmetric information on the creation of budgetary slack; and (6) Organizational ethical climate does not moderate the effect of asymmetric information on the creation of budgetary slack.

Background: Medicinal and Aromatic Plants (MAPs) are part of a few products that Albania exports in World’s level. The results showed us that the available MAPs value chain information in Albania through several cases is limited and doesn’t match with reality. Objectives: Our research aims to verify the actual situation of the information system between the actors of the MAPs value chain in Albania. Methods/Approach: In this research is used the systemic method, which takes into consideration the analysis through all the main value chain links. For each value of the chain links has been selected a statistical representation number or a sample. Results: The actors that operate through the MAPs market in Albania are in front of the asymmetric information. The sources and the methods used are not on the proper level to offer the real results in this value chain. There are many information system sources for the Albanian MAPs sector, but none of them offers any detailed data about the quantity and the value on plant’s level. Conclusions: The information system of the MAPs value chain is not functional through all the links, while the fabrication still remains on limited levels. The creation of a monitoring system database in time and space for the entire MAPs sector is a necessity.

Easley and O'Hara (1992) introduce Probability of Informed Trading (PIN) concept to measure the degree of asymmetric information in market. Since then there has been a lot of debate on the accuracy of the calculations for PIN. Lin and Ke (2011) by using Factorization method and Yan and Zhang (2012) using Grid-Search based methods introduced other ways to improve the accuracy of the measurement. In this paper, we compare four different methods of PIN calculation for 206 selected companies for listed companies in Tehran Stock Exchange (TSE). We used maximum likelihood method to estimate parameters. The results show that the average of PIN for LK methodology is 0.242 and for EHO is 0.281 in our sample. Moreover, clustering Approach is faster which make it more suitable for practical applications in the real market. Comparison of standard deviation of different methods shows that Grid Search approach is more stable with lower variations in the results.

The article is aimed at identifying the impact of information incompleteness and asymmetry, irrational behavior of actors on the processes of municipal wastes management. It has been found that, at the present moment in Ukraine, quality of the transfer of information flows on the municipal wastes management between the State authority, local government bodies, enterprises, and the public stays at a low level. The urban sanitation schemes are being adopted and waste management technologies are being introduced at the local level, but the local government bodies have not been provided with sufficient information to make optimal decisions. Acting independently, the market mechanism would not be able to overcome the asymmetry of information in the short terms, and the State intervention would be needed to correct the information inadequacy of the municipal waste market. Prospect for future research will be determining conditions for an effective distribution of information flows in the process of municipal wastes management.

Corporate social responsibility (CSR), once thought of only a philanthropic activity of a firm, is now treated as a serious business strategy that can contribute to a firm’s profitability. The seemingly altruistic activity helps build the firm’s image with all the stakeholders including its customers so that it has the potential to increase the firm’s profit. This fact is now well established in research literature. Product differentiation is another corporate strategy that is pursued by some companies in order to offer a distinctive product in the market to avoid competition, charge premium price, and increase profit. What is not known is that when two firms compete in a Hotelling type product differentiation line, how much this product differentiation is affected by the extent of the CSR activity of a firm. Our study is conducted in a game-theoretic setting where the CSR firm is competing with a non-CSR firm. The CSR firm maximizes a convex combination of its own profit and a form of social utility function, while the non-CSR firm maximizes its own profit only. The CSR firm is also assumed to have a technological advantage that reduces its production cost. The interaction of the effects of both the extent of CSR and the extent of this production cost advantage is also considered. We also study a scenario of asymmetric information. Our main results include that the degree of product differentiation is reduced when CSR is practiced. On the other hand, product differentiation increases with the production cost advantage. The interaction between the two factors – CSR activity and cost advantage – is also studied.

This paper studies whether a Cournot oligopoly with unknown costs should be left unregulated, or regulated according to the optimal mechanism of Gradstein (1995), or first monopolized and then regulated according to the optimal mechanism of Baron and Myerson (1982). We show that the answer to this question depends on the number of the oligopolistic firms and the size of their fixed costs, as well as on the weight of the producer welfare in the social objective function.

Using a large panel of 5086 firms from 7 European countries, namely Belgium, France, Germany, Italy, Netherland, Sweden and UK over the period of 1981 to 2010, we made attempt to see the effect of financial constraints on international corporate policies based on their liquidity demand. Controlling for firm size, investment opportunities and alternative sources and competing uses of funds, a firm's decision to change its cash holdings is found to be positively and significantly related with internal cash flows. Our results further reveal that constrained firms like to save relatively more cash out of their cash inflows, whereas the unconstrained firms do not maintain any such significant cash hoarding behavior. The observed relationships prevail for the whole sample, within each countries and remain consistent across different estimation procedures and alternative financial constraint criteria. Our results thus point to the fact that average firms in our sample face constrained access to external finance due to financially imperfect and incomplete markets.

This paper tests the validity of the Corwin-Schultz bid-ask spread estimator in the Brazilian stock market. The Corwin-Schultz estimator arises as an easy way to compute asymmetric information throughout daily high and low stock prices for estimating overnight and non-negative adjusted spreads. The sample consisted of Ibovespa firms from 1986 to 2014 and was analysed with time series econometrics. The findings show that the measures of spread have stationarity properties, allowing for forecasting in a period of lagged variables, besides having the property of time-varying cointegration with market-to-book ratio, debt on equity, size and return and also presenting sensibility to different periods, industries and listing segments. Thus, the Corwin-Schultz bid-ask spread estimator seems to be a valid and reliable measure for forecasting aggregate-data variables through the weighted average of firm-level variables.

This research examines the effects of a firm’s asymmetric information on its choice of two mechanisms of corporate governance: the board monitoring intensity and CEO incentive alignment. The sample consists of 112 firms listed in Tehran Stock Exchange during 2006-2010. Data has been collected using Rahavard Novin software and Tehran Stock Exchange archive. The statistic analysis has been done by multivariate regression. The results show that firms facing greater asymmetric information tend to use less intensive board monitoring but rely on more CEO incentive alignment.

The purpose of this paper is to examine the determinants of collateral for small and medium enterprises (smes) in the context of Visegrad countries: Czech Republic, Slovak Republic, Hungary and Poland. The data set for this paper was obtained from the Business Environment and Enterprise Performance Survey (BEEPS), which was conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) from 2012–2014. A binary logistic regression model with different specifications was employed to examine the effect of independent variables on the incidence of collateral. The results show that risky borrowers need to pledge collateral and the reduction of asymmetric information can lower the incidence of collateral for smes. Moreover, we find that female borrowers are more likely to pledge collateral than male borrowers are. The results also suggest that loans with a longer maturity are more likely to be collateralized than short-term loans. We find evidence that bank-borrower proximity can alleviate the incidence of collateral whereas bank concentration may increase collateral requirements. Policy makers may consider these results to implement policies that can promote bank competition and can lower collateral requirements for female borrowers. The paper contributes to the ongoing debate on the determinants of collateral.

This study aims to answer the question: "What factors that influence the price of corporate loans in Indonesia?" And "Are there some differences in loan pricing between several types of creditors?". Furthermore, this research is to develop and test the loan pricing model that was developed in America and Europe to the context or setting in Asia, especially Indonesia. Different conditions and settings of the financial system between America/Europe and Asia, especially Indonesia, causing the loan pricing model that was developed in America/Europe can not be fully implemented for Indonesia. Key issues in this study consisted of: information asymmetry, moral hazard and funding structure. The first issue, information asymmetry consists of the type of creditors, foreign and domestic ownership, public and non-public ownership. The second issue, moral hazard problem consists of variables governmental and non-government ownership, and the special relationship between creditors and debtors. The last issue, creditors’ structure of funding is proxied by the ratio of CD / ML. In addition, this study also adobt the loan pricing models that are developed in America / Europe as control variables. This study also examines the argument of Strahan (1999) whether the loan fees also reflected the condition of the loan as well as loan spreads. The OLS regression (Ordinary Least Squares) with white correction method (White heteroskedasticity correction) for heteroscedasticity problem is conducted to test the model. Various samples and sub samples are prepared to answer various research questions and hypotheses. Testing between regression coefficients are conducted to examine differences in loan pricing between different types of creditors for each variable in the model. The test results generally show that only two new variables suggested by the study, namely: ownership and structure of funding have a significant contribution to the loan pricing model. For variable type of institution consisting of investment banks and commercial banks indicate that generally there is no difference in loan pricing between the two, only in some models of these variables are not significant with signs consistent.Ownership variable show results consistent with the hypothesis and significant effect on loan prices. While the variable special relationship between creditors and debtors have no effect on loan prices, it is due to inter-group loans made by conglomerates. For the case of capital costs of the creditor shows that the variable has a positive effect on lending rates set by creditors. Testing different regression coefficients lead to the conclusion that domestic creditors succeeded in detecting an increased risk of the debtor before the economic crisis of 1997 compared with foreign creditors.

The paper examines the determinants of the level of investment in net operating working capital by firms in Malaysia. Data from 192 companies spanning a period of 8 years (2000- 2007) are analysed using the OLS regression technique for this purpose. The study finds that in times of economic expansion, younger and smaller firms with less tangible assets, low leverage, high immediate sales growth, high operating cash flows, less volatile revenues and low levels of asymmetric information are likely to have the highest investments inoperating working capital. Board characteristics, namely size and the independence of the board, are not found to have any significant influence on the working capital investment of firms.

The aim of this research is to examine the effect of assymetric information on underpricing. This research used a sample of 63 companies that make initial public offering on the Indonesia Stock Exchange in the period of 2005-2010. The data analysis is using multiple linear regression, which is testing the proxy of asymmetric information which consists of the firm size, the firm age, the proportion of shares offered to the public, underwriter reputation and auditor reputation on underpricing. This research indicates that underwriter reputation and auditor reputation have a significant effect on underpricing. The firm size, the firm age and the proportion of shares offered to the public have no significant effect on underpricing.

In the paper we analyze an adverse selection model with three states of nature, where both the Principal and the Agent are risk neutral. When solving the model, we use the informational rents and the efforts as variables. We derive the optimal contract in the situation of asymmetric information. The paper ends with the characteristics of the optimal contract and the main conclusions of the model.

The economic crisis is now a common reality in most parts of the world, being translated in mass unemployment, collapse of the social system and an impressive number of bankruptcies. The paper focuses on the beginning of the recession in the American real estate sector by analyzing the implications of imperfect information and moral hazard as main factors that contributed to the deterioration of real estate market and also to accentuating the overall poor economic situation. In that context, asymmetric information served the interests of banks and other institutional speculators who made use of it in order to increase their profitability through market manipulation. The central aspect the paper underlines is the international contamination created by disguising toxic real estate actives and spreading them throughout the global economy through transactions with foreign business partners.

The evolution of corporate ownership structure, in particular the resolution of asymmetric information among stockholders, managers and creditors, requires very complex research. This paper aims to investigate how asymmetric information determines stakeholders to behave and how financial decision bears upon the performance of the organization.

Our paper starts from the relationship, apparently contradictory, between the better informed economic agents (managers, bankers) and the agents less informed than the first to be mentioned (the investors: shareholders and creditors). The asymmetric information concerns the company’s performance (or of its investment projects) and the company’s ability to put up with different manifestations of the risk associated with this kind of performance. Based on this asymmetric information, the better informed agents can profit, to their own advantage, from the others’ lack of information. Consequently, the signals should be sent so as to allow a clear distinction of profitable companies from unprofitable ones, signals which cannot be copied by the managers with an underperforming management: a. The sustainable growth based on retained earnings financing and also co-financed by managers; b. The degree of operational leverage to be proportional with the increase of modernizing managerial and technological expenses; c. The degree of financial leverage to be proportional with the volume of debts.

This paper investigates implications of the static tradeoff theory and the pecking order theory. The results suggest that firms adjust their debt levels according to target debt ratios as well as the pecking order. By combining the two theories, the research finds that firms are more likely to increase debt when they face financing needs as well as below-target debt level, while they are more likely to decrease debt level when they have surplus cash flows as well as above-target debt level. The pecking order is found to be a much more bindingforceforsmallfirms, supportingthehypothesisthatsmallfirmsaremorelikelytofollowthepecking order because o f the difficulty in accessing external financing sources due to asymmetric information. The research also finds that small firms are significantly slower than large firms in adjusting the debt level when the adjustment requires an increase in debt level according to the target adjustment model.

Since the pioneering work of Gurley and Shaw (1955), the attempt has been done to justify money as a primary focal point of macroeconomic theorizing. However, other researchers argue that variables such as financial development and indicators are also important to be linked with macroeconomic performance. Here, if money can be thought as means of production and consumer goods as the ultimate end toward which production is directed, and then capital also occupies a position that is both logically and temporarily intermediate between original means and ultimate ends. This temporarily intermediate status of capital is not in serious dispute, but its significance for macroeconomic theorizing is rarely recognized. The firms’ decision to acquire funds through debt and equity financings affects the capital structure, and, in the firm’s balance sheet, the impact of capital appears to influence the inventory investment. Hence, the significance of capital structure –induced inventory distortions in the context of firm-level is the basis for our article. The sample for our analysis is compiled from the balance sheets of listed syaria firms in the Kuala Lumpur Stock Exchange for the period 1995-2000.