Publication Type

Journal Article

Version

Preprint

Publication Date

1-2012

Abstract

Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. Relying on theories about competition between informed investors as well as the pricing of information asymmetry, we hypothesize a cross-sectional variation in the pricing of information asymmetry that is conditional on competition. We develop and validate empirical proxies for competition using the number and concentration of institutional investor ownership. Using these proxies, we find a lower pricing of information asymmetry when there is more competition. Overall, our results suggest that competition between informed investors has an important effect on how the information environment affects the cost of capital.

Keywords

Information Risk, Information Quality, Asset Pricing

Discipline

Accounting | Corporate Finance

Research Areas

Financial Performance Analysis

Publication

Accounting Review

Volume

87

Issue

1

First Page

35

Last Page

58

ISSN

0001-4826

Identifier

10.2308/accr-10157

Publisher

American Accounting Association

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.2308/accr-10157

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