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- Title
Does Information Asymmetry Affect Dividend Policy? Analysis Using Market Microstructure Variables.
- Authors
Kim, Seonhyeon; Jung, Jin-young; Cho, Sung-woo; Geem, Zong Woo
- Abstract
This study analyzes the relationship between information asymmetry and dividend policy in an emerging market, Korea. We adopt several proxies for information asymmetry, such as the Glosten–Harris and Hasbrouk–Foster–Viswanathan models, drawn from market microstructure literature. This study finds a negative relationship between information asymmetry and dividend yields, which appears to be particularly strong when firms have difficulty raising external capital because they have high systematic risk, financial constraints, or low stock liquidity. This result, based on an analysis using market microstructure variables that provide direct measures of information asymmetry, suggests that the pecking order theory holds for the Korean stock market and that information asymmetry is a strong determinant of dividend policy decisions in an emerging market.
- Subjects
SOUTH Korea; DIVIDEND policy; INFORMATION asymmetry; DIVIDEND yield; MARKETING research; STOCK exchanges
- Publication
Sustainability (2071-1050), 2021, Vol 13, Issue 7, p3627
- ISSN
2071-1050
- Publication type
Article
- DOI
10.3390/su13073627