Pricing of Information Distribution Based on Comparability and Market Inefficiency

Document Type : Research Paper

Author

Assistant Prof., Department of Accounting, Faculty of Economics and Administrative Sciences, Lorestan University, Khoram Abad, Iran.

Abstract

Objective: Flow of information is a key parameter in an economic activity and acts as a crucial factor in the emergence, stability and efficiency of capital markets. The purpose of this paper is to investigate the effect of the comparability and ineffectiveness of the market on the value of information and changes in the distribution of accounting information.
Methods: For this purpose, the data of the firms listed in Tehran Stock Exchange for the period of 2006 to 2016 were extracted and the regression model of the pooled data was used to test the research hypothesis.
Results: The results of the research show that information asymmetry, comparability and market inefficiency have a significant effect on the expected returns (cost of capital) of investors. On the other hand, the interactive effects of comparability and imperfect market on the relationship between information asymmetry and cost of capital have been confirmed. Finally, the results of the research show that information asymmetry is a function of comparability and that the capital cost resulting from information asymmetry fluctuate and varies at different levels of comparability.
Conclusion: Information asymmetry and market inefficiency can increase the firm's cost of capital, as less informed traders recognize that they are in a bad state of information and therefore maintain fewer assets within the market. The comparability along with creating high-quality information reduces the overall ambiguity and thus reduces the benefits that particular investors receive from private information about the company.
 

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References

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Financial Research Journal
Volume 20, Issue 4
2018
Pages 531-553

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