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Some aspects of information asymmetry and its effect on the cost of capital

Alexandra Yancheva


Information asymmetry of capital markets is observed on two levels of the market relations between the participants - between investors themselves and between investors and managers. The probability of informed trading is underlying the occurring asymmetry. Identification of the liaison between disclosure and information asymmetry is a transitive step to the review of the impact of information asymmetry on the corporate cost of capital. To evaluate the effect of the first two factors different correlations may be used; this specific research reviews liquidity of securities and estimation risk, which affect the corporate cost of capital.


information asymmetry, disclosure, informed trading, cost of capital, liquidity, estimation risk

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