Corporate Integrity and Information Asymmetry: Evidence from Iran.

Abstract

Corporate integrity is considered part of the company's development strategies, which, in the long run, can increase firms' financial transparency to stakeholders. Our study aims to present a corporate integrity model and then investigate its effect on firms' information asymmetry. This study uses Metaanalysis and Delphi analysis in the qualitative part to measure corporate integrity. Then, in the quantitative section, the corporate integrity questionnaires were sent to the managers of the sample firms. Subsequently, a total of 138 questionnaires were completed and sent back, which were used as the final samples for analysis. In addition, information asymmetry is measured using three different proxies, namely bid-ask spread, turnover, and Amihud illiquidity measure. Our findings show corporate integrity's significant and negative effect on information asymmetry. These results suggest that corporate integrity, by promoting behavioral values based on truthfulness and commitment, the structures will enhance the corporate governance mechanisms and, thereby, firstly motivate the managers to reduce the agency gap and, secondly, implement a more practical level of the supervisions on the firm's performances in front of the stakeholders by accelerating the circulation of information and giving timely and reliable feedback to the stakeholders. This is the first study that presents a corporate integrity model through qualitative analysis and then investigates the effect of corporate integrity on firms' information asymmetry. Therefore, our study can contribute to the extant literature of this context.