The DOI matches its Crossref record; 50 of the 50 references it cites were found in a registry or an index.
Information Asymmetry, Information Precision, and the Cost of Capital
Abstract
This paper examines the relation between information differences across investors (i.e., information asymmetry) and the cost of capital and establishes that with perfect competition information asymmetry makes no difference. Instead, a firm’s cost of capital is governed solely by the average precision of investors’ information. With imperfect competition, however, information asymmetry affects the cost of capital even after controlling for investors’ average precision. In other words, the capital market’s degree of competition plays a critical role for the relation between information asymmetry and the cost of capital. This point is important to empirical research in finance and accounting.
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Cites
The Market for "Lemons": Quality Uncertainty and the Market Mechanism
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CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*
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Bid, ask and transaction prices in a specialist market with heterogeneously informed traders
Glosten, L. R., & Milgrom, P. R. (1985) · Journal of Financial Economics · doi:10.1016/0304-405x(85)90044-3 · Cited by 6,115
A Simple Model of Capital Market Equilibrium with Incomplete Information
MERTON, R. C. (1987) · The Journal of Finance · doi:10.1111/j.1540-6261.1987.tb04565.x · Cited by 5,811
Disclosure, Liquidity, and the Cost of Capital
DIAMOND, D. W., & VERRECCHIA, R. E. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb04620.x · Cited by 3,836
Self-citationOn the impossibility of informationally efficient markets
Stiglitz, J. E., & Grossman, S. J. (1980) · Columbia University · doi:10.7916/d8765r99 · Cited by 3,645
A Theory of Intraday Patterns: Volume and Price Variability
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Self-citationLEUZ, C., & WYSOCKI, P. D. (2016) · Journal of Accounting Research · doi:10.1111/1475-679x.12115 · Cited by 1,760
Self-citationThe information content of mandatory risk factor disclosures in corporate filings
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Metadata
- Authors
- Lambert, R. A., Leuz, C., & Verrecchia, R. E.
- Venue
- Review of Finance
- Publisher
- Oxford University Press (OUP)
- Published
- 2011-06-14
- Volume
- 16
- Issue
- 1
- Pages
- 1-29
- ISSN
- 1382-6662 (ISSN-L)
- 1573-692X
- 1572-3097
- OpenAlex
- W3023729765
- Cited by
- 521
- References
- 50
- FWCI
- 40.35
- Type
- journal article
- Language
- en
- Open access
- closed
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- Lambert, R. A., Leuz, C., & Verrecchia, R. E. (2012). Information Asymmetry, Information Precision, and the Cost of Capital. Review of Finance. https://doi.org/10.1093/rof/rfr014
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
