A Study of Impact of Ownership Structure and Disclosure Quality on Information Asymmetry in Iran

Abstract

Executive Summary Capital market uses financial information with high disclosure quality, and this information can influence capital market decision-making. Corporate governance research shows that ownership structure can influence financial reporting quality, and thus play an effective role in capital market decision-making. The main purpose of the current study is to examine the impact of ownership structure and disclosure quality on the information asymmetry phenomenon among the listed companies on the Tehran Stock Exchange (TSE). Ownership structure (including ownership concentration and institutional ownership) and disclosure quality (including reliability and timeliness) are considered as independent variables, and their impact is examined on the dependent variable (information asymmetry). Consistent with extant literature, bid-ask spread is used as a proxy variable for information asymmetry. The statistical results, based on data collected from 102 listed companies on the TSE during 2007–2014, revealed positive impact of ownership structure and negative impact of disclosure quality on information asymmetry. These results show that information asymmetry is less in firms that published more reliable and timely information, and is more in firms with more concentrated ownership structure, higher institutional ownership, and lower disclosure quality. In other words, reliability and timeliness of information have a positive role in stock price identification and close-up views of the buyer and seller in TSE. Findings of this article can assist accounting researchers and theoreticians in comparing real world facts with hypotheses developed with respect to ownership structure, disclosure quality, and information asymmetry. By increasing transparency in the capital markets, market participants, decision-makers, financial analysts, and potential investors are aided in their analysis of plans for investments in financial assets.

Determinant of Downward Auditor Switching

“…Observation of capital market practitioners shows that shareholders switching affect to auditor switching (Lodge, 2008). Previous research has proven that share ownership factors could decrease agency conflict by information asymmetric minimizing (Shiri, Salehi, & Radbon, 2016). In this research, ownership seen by significant intervention (above 5 percent ownership) (Hudaib & Cooke, 2005), measured by percentage of foreign/managerial/institutional ownership.…”

Disclosure Quality and its Impact on Financial Reporting Quality, Audit Quality, and Investors’ Perceptions of the Quality of Financial Reporting: A Literature Review

“…Companies may present financial and non-financial disclosures in their financial statements, notes to the financial statements, management discussion and analysis, and on other legal reports. Some companies may even choose to disclose information in management forecasts and the press (Shiri et al, 2016). Whilst some companies follow traditional, paper-based methods of disclosure, other companies may opt for online reporting due to it being more time and cost effective (Ojah & Mokoteli, 2012;Andrikopoulos & Kriklani, 2013).…”

“…Several empirical studies on corporate disclosures have been conducted in the past two decades. These studies have discussed several issues, such as the potential determinants of disclosures, which are mainly based on a firm's characteristics (see for example: Khlif and Souissi, 2010; Aly et al, 2010; Al-Htaybat, 2011); mandatory and voluntary disclosure (Wang et al, 2015;Uyar et al, 2013;Nilé hn and Thoresson (2014); Shiri et al, 2016;Lim et al, 2017); financial and non-financial disclosure (Arvidsson, 2011); corporate governance disclosure (Gandia, 2008); and social and environmental disclosure (Magness, 2006;Fatima et al, 2015;Al-Shaer et al, 2017;Alipour et al, 2019). These studies have used different theoretical perspectives which set concrete and explanatory grounds for corporate disclosures.…”

Moderating role of firms’ rank in ASEAN corporate governance scorecard on effect of foreign ownership on firm value

“…In order to minimize agency conflict, shareholders have to do management monitoring, so management will less likely act based on their own interests and more likely act based on shareholders wealth and firm value increasing. Previous researches have proved that share ownership factors could decrease agency conflict by information asymmetric minimizing (Shiri, Salehi, & Radbon, 2016), financing cost minimizing (Tan & Ma, 2016), and firm value maximizing (Cheung, Stouraitis, & Tan, 2011;Wei, Xie, & Zhang, 2005).…”