Insider Ownership and Industrial Competition: Causes and Consequences of Information Asymmetry

The study focuses on the causes and consequences of information asymmetry. Using a sample of 180 Malaysian manufacturing firms, the findings show that insiders and industrial competition contribute to the problem of information asymmetry. The presence of large shareholders as insiders in low competi... Full description

The study focuses on the causes and consequences of information asymmetry. Using a sample of 180 Malaysian manufacturing firms, the findings show that insiders and industrial competition contribute to the problem of information asymmetry. The presence of large shareholders as insiders in low competitive industries further aggravates the problem. Although to a certain degree minority shareholders in low competitive industries also share some benefits of monopolistic rents, insiders are found to be accelerating information asymmetry to protect their personal interests, which subsequently cause share returns to diminish. Consequently, we found that the relationship between information asymmetry and share returns is negative. The findings show that insiders and industrial competition have implications for corporate governance and stock market liquidity policies.