We examine whether the previously documented pricing premium for firms’ equity when they meet or beat earnings expectations (MBE) is attributable to a reduction in the cost of equity capital via a reduction in information asymmetry. We measure the latter using the probability of informed trading (PIN) from Easley et al. (1997). We find that PIN decreases (increases) when firms meet or beat (mis...

Using path analysis, we investigate the direct and indirect links between three measures of earnings quality and the cost of equity. Our investigation is motivated by analytical models that specify both a direct link and an indirect link that is mediated by information asymmetry, but do not suggest which link would be more important empirically. We measure information asymmetry as both the adve...

The article shows that two measures of the amount of private information in stock price—price nonsynchronicity and probability of informed trading (PIN)—have a strong positive effect on the sensitivity of corporate investment to stock price. Moreover, the effect is robust to the inclusion of controls for managerial information and for other information-related variables. The results suggest tha...

This paper aims to examine how corporate insider trading influences patterns of foreign and institutional investors especially in firms with high discretionary accruals low book-to-market ratios as proxies for information uncertainty. study uses methods such informed traders who are considered gather more precise before after tests affects traders. The results this provide evidence that is like...

information asymmetry is a negative event that gives manager incentives to use his private information to attempt transferring wealth from investors by overstating financial performance and consequently, stock prices during his tenure at the firm. the manipulations generate agency costs. conservative reporting is a mechanism that reduces the managers’ ability to manipulate and overstate financi...