information asymmetry

Examples of information asymmetry in the following topics:

• Role of Financial Markets in Providing Feedback to Management

  • Management often has imperfect information about its own business, especially its business' value in the outside world .
  • For example, investors who hold shares in multiple firms in a sector may have more information about the prospects in that sector than the manager of one firm in that sector.
  • In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other, creating an imbalance of power.
  • Financial economists have applied information asymmetry in studies of differentially informed financial market participants (insiders, stock analysts, investors, among others).

• Signaling

  • Signaling took root in the idea of asymmetric information, which says that in some economic transactions, inequalities in access to information upset the normal market for the exchange of goods and services .
  • An information asymmetry exists if firm managers know more about the firm and its future prospects than the investors.
  • When investors have incomplete information about the firm (perhaps due to opaque accounting practices) they will look for other information in actions like the firm's dividend policy.
  • Miller and Rock pointed out that this is likely due to the information content of dividends.
  • Describe what information a shareholder can obtain from a company issuing dividends

• Pecking Order

  • In corporate finance pecking ordering consideration takes into account the increase in the cost of financing with asymmetric information.
  • Pecking order theory basically states that the cost of financing increases with asymmetric information.
  • Goyal and Frank show, among other things, that Pecking Order theory fails where it should hold, namely for small firms where information asymmetry is presumably an important problem.

• Average and Marginal Cost

  • Economic factors that impact the marginal cost include information asymmetries, positive and negative externalities, transaction costs, and price discrimination.

• Investor Preferences

  • There are a number of factors, such as psychology, taxes, and information asymmetries tied into this puzzle, which further complicate the matter.

• The Nature of Dividends

  • Due to information asymmetry between investors and the firm managers, investors will look to indicators like dividend decisions.
  • Managers have more information than investors about the firm, and such information may inform their dividend decisions.
  • Conversely, managers that have access to information that indicates very good future prospects for the firm are more likely to increase dividends.

• Optimal Capital Structure Considerations

  • Actual market considerations when dealing with capital structure include bankruptcy costs, agency costs, taxes, and information asymmetry.

• Neoclassicism

  • The latter, with its emphasis on asymmetry, bright colors, and ornamentation is typically considered to be the direct opposite of the Neoclassical style, which is based on order, symmetry and simplicity.
  • Additionally, archaeological ruins found in Pompeii and Herculaneum informed many of the stylistic values of Neoclassical interior design based on the ancient Roman rediscoveries.

• Chirality and Symmetry

  • (ii) Asymmetry: The absence of all symmetry elements.
  • Click on the following link for more information (http://www.georgehart.com/virtual-polyhedra/vp.html).

• Animal Characterization Based on Body Symmetry

  • Animals can be classified by three types of body plan symmetry: radial symmetry, bilateral symmetry, and asymmetry.
  • Only a few animal groups display radial symmetry, while asymmetry is a unique feature of phyla Porifera (sponges).