Asian Review of Financial Research Vol.21 No.3 pp.1-39
Investor Relations and Information Asymmetry
Key Words : Investor relations,information asymmetry,PIN,adverse selection cost,Investor Relations
We hypothesize that investor relations(IR) as voluntary disclosures lead to long-term reductions in information asymmetry among investors. The results show that firms which held IR experience a significant decline in the subsequent level of information asymmetry, in contrast to firms which did not. This decline in information asymmetry results from less trading by privately informed investors relative to uninformed investors. After the potential endogenous relation between disclosure and information asymmetry is controlled, the results are robust. Additionally, we find that IRs held consecutively over two quarters do not contribute to the further decline in information asymmetry. The results imply that IR activities are effective in reducing information asymmetry and therefore, might contribute to a decline in the cost of capital.