Evaluating the Effect of Asymmetric Information and Scale Effect on Market Structure in Tehran Stock Exchange
Subject Areas : Financial engineering
monir sadat mirjamali mehrabadi
1
,
abbas najafizadeh
2
,
majid zanjirdar
3
,
peyman ghafari ashtiani
4
1 - Department of Economics, Arak Branch, Islamic Azad University, Arak, Iran
2 - Department of Economics, Arak Branch, Islamic Azad University, Arak, Iran
3 - Department of Financial Management, Arak Branch, Islamic Azad University, Arak, Iran
4 - Department of Business Management, Arak Branch, Islamic Azad University, Arak, Iran
Keywords: Asymmetric Information, Market Structure, Scale Effect, Tehran Stock Exchange & GLS- Panel,
Abstract :
Role of information in economy started from questioning one of the assumptions of perfect competition theory in market. In stock market, information plays an important role in determining the level of competitiveness. In this study tried to measure the competitiveness of firms in Tehran Stock Exchange by using income equations in the presence of asymmetric information. In this regard, first, using the income equations and a GLS- Panel has been paid the effect of various variables. The results indicate that equations without the effect of scale offer better specification of the firms’ conditions. Although asymmetric information is high in stock market and stock gains influenced by the degree of asymmetric information, but extent of this influence is limited. The “H competitiveness index” shows that monopolistic competition is best description of market conditions in equations of incomes from changes in stock prices, but in equations of incomes from stocks dividends and accumulated, the performance of studied firms be explained with monopolistic behavior.
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15- Al-Muharrami, S., Matthews, K., & Khabari, Y., 2006, Market Structure And Competitive Conditions In The Arab GCC Banking System, Journal of Banking & Finance, 30(12), 3487-3501.
16- Apergis, N., Fafaliou, I. and Polemis, M.L., 2016, New Evidence on Assessing the Level of Competition in the European Union Banking Sector: a Panel Data Approach, International Business Review, 25(1).
17- Balakrishnan, K., Vashishtha, R., and Verrecchia, R. E., 2019, Foreign Competition for Shares and the Pricing of Information Asymmetry: Evidence from Equity Market Liberalization, Journal of Accounting and Economics, 67(1), 80-97.
18- Bessembinder, H., 2003, Trade Execution Costs and Market Quality after Decimalization, Journal of Financial and Quantitative Analysis, 38(4).
19- Bikker, J.A. and Groeneveld, J.M., 2000, Competition and Concentration in the EU Banking Industry, Kredit und Kapital, 33.
20- Bikker, J.A. and Haaf, K., 2002, Competition, Concentration and their Relationship: An Empirical Analysis of the Banking Industry, Journal of banking and finance, 26(11).
21- Bikker, J.A., Shaffer, S. and Spierdijk, L., 2012, Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and Equilibrium, Review of Economics and Statistics, 94(4).
22- Billett, M.T., Garfinkel, J.A. and Yu, M., 2017, The Effect of Asymmetric Information on Product Market Outcomes, Journal of Financial Economics, 123(2).
23- Capron, L. and Shen, J.C., 2007, Acquisitions of Private Vs. Public Firms: Private Information, Target Selection, and Acquirer Returns, Strategic Management Journal, 28(9).
24- Claessens, S. and Laeven, L., 2004, What Drives Bank Competition? Some International Evidence, Journal of Money, Credit and Banking, 36.
25- Clarke, J. and Shastri, K. 2000, On Information Asymmetry Metrics, Social Science Research Network Electronic Paper Collection, and Available at http: //ssrn.com/abstract=251938 (visited 8 May 2016).
26- Cohen, B.D. and Dean, T.J., 2005, Information Asymmetry and Investor Valuation of Ipos: Top Management Team Legitimacy as a Capital Market Signal, Strategic Management Journal, 26(7).
27- Crawford, G.S., Pavanini, N. and Schivardi, F., 2018, Asymmetric Information and Imperfect Competition in Lending Markets, American Economic Review, 108(7).
28- Fang, H. and Wu, Z., 2018, Multidimensional Private Information, Market Structure, and Insurance Markets, the RAND Journal of Economics, 49(3).
29- Glosten, L.R. and Harris, L.E., 1988, Estimating the Components of the Bid/Ask Spread, Journal of Financial Economics, 21(1).
30- Kaplanski, G. and Levy, H., 2015, Trading Breaks and Asymmetric Information: the Option Markets, Journal of Banking and Finance, 58.
31- Laussel, D., 2018, Complementary Monopolies with Asymmetric Information: A Private Common Agency Model, SSRN Electronic Journal.
32- Lee, C.M. and Ready, M.J., 1991, Inferring Trade Direction from Intraday Data, the Journal of Finance, 46(2).
33- Maddala, G.S, Dobson. S., Miller, E., 1995, Microeconomics: The Regulation of Monopoly, Chapter. 10, Press Mc Grawhill Book Company, 189-195.
34- Mas-Colell, A., Whinston, M.D. and Green, J.R., 1995, Microeconomic Theory: Oxford University press, New York.
35- Molyneux, P., Lloyd-Williams, D.M. and Thornton, J., 1994, Competitive Conditions in European Banking, Journal of banking and finance, 18(3).
36- Myers, S. C., & Majluf, N. S., 1984, Corporate Financing and Investment Decisions When Firms Have Information That Investors do not Have, Journal of Financial Economics, 13(2), 187-221.
37- Panzar, J.C. and Rosse, J.N., 1987, Testing for "Monopoly" Equilibrium, The journal of industrial economics.
38- Schaeck, K., Cihak, M. and Wolfe, S., 2009, Are Competitive Banking Systems more Stable?, Journal of Money, Credit and Banking, 41(4).
39- Shaffer, S., 1982, Competition, Conduct and Demand Elasticity, Economics Letters, 10(1-2).
40- Shephard, W.G., 1990, the Economics of Industrial Organization, Prentice HALL.
41- Spence, M., 1976, Informational Aspects of Market Structure: an Introduction, the Quarterly Journal of Economics, 90.
42- Spindler, M., W, J. and Hagmayer, S., 2014, Asymmetric Information in the Market for Automobile Insurance: Evidence from Germany, Journal of Risk and Insurance, 81(4).
43- Stiglitz, J. and Greenwald, B., 2003, Towards a New Paradigm in Monetary Economics, Cambridge University Press.
44- Stiglitz, J.E. and Weiss, A., 1981, Credit Rationing in Markets with Imperfect Information, The American Economic Review, 71(3), 393-410.
45- Stiglitz, J.E., 2000, the Contributions of The Economics of Information to Twentieth Century Economics, The Quarterly Journal of Economics, 115(4).
46- Wang, K.T. and Wang, W.W., 2017, Competition in the Stock Market with Asymmetric Information, Economic Modelling, 61.
47- Xanthos, F., 2014, A Note on the Equilibrium Theory of Economies with Asymmetric Information, Journal of Mathematical Economics, 55.
48- Yildirim, H.S. and Philippatos, G.C., 2007, Restructuring, Consolidation and Competition in Latin American Banking Markets, Journal of Banking and Finance, 31(3).
49- Zajac, E.J., 1990, CEO Selection, Succession, Compensation and Firm Performance: a Theoretical Integration and Empirical Analysis, Strategic Management Journal, 11(3).
