Investigating the effect of information asymmetry on incorrect stock pricing with emphasis on the role of corporate political communication

Document Type : Research Paper

Authors

1 Assistant Professor,Department of Management,Economics and Accounting,Payame Noor University,Tehran,Iran

2 Master student of accounting, Payame Noor University, Tehran, Iran

Abstract

Introduction
The basis of investing in the capital market is the information issued by companies, and if the information is not distributed fairly and symmetrically, the reaction of investors will be unrealistic, and this can put a gap between the stock price and its intrinsic value, the so-called price, say, incorrect stock placement. Another factor that can affect information asymmetry is political communication. Therefore, the purpose of this study is to investigate the effect of information asymmetry on incorrect stock pricing with emphasis on the role of corporate political communication. To measure information asymmetry, three separate methods have been used (stock price range, Amihud liquidity criterion and stock return volatility). The criterion for measuring incorrect pricing is the 5-factor model stock of Pantzalis and Park (2013).
 
Hypotheses
The more ambiguous the information of existing investors about the real but invisible distribution of future flows, the greater the degree of deviation of market value from intrinsic value (Nowruzi and Khodadadi, 2016). At the same time, the political relations of companies with the government can affect this relationship. Therefore, the research hypotheses are specified as follows:
H1: Information asymmetry affects incorrect stock pricing.
H2: Political connection affects the relationship between information asymmetry and incorrect stock pricing.
 
Method
The present research is applied and from a methodological point of view, causal (post-event) correlation. The statistical population studied in this study is all companies listed on the Tehran Stock Exchange and the period under study is the years 1390 to 1399. Since the data of the next year are needed to calculate some variables, 9 years have been used as the main example of the research. In this research, the systematic elimination method is used to reach the sample, 110 companies have been selected as the research sample. Data analysis was performed using the combined data method and with the data panel approach and using the Ives 13 software to test the hypotheses.
 
 
 Results
The results showed that there is a direct and significant relationship between information asymmetry (with all three methods of measurement) and incorrect stock pricing. Also, the political relationship directly affects the relationship between information asymmetry and incorrect stock pricing and intensifies this relationship, except for the method of measuring information asymmetry with the method of amiod liquidity, whose interaction with the political relationship has no effect on incorrect stock pricing.
 
 Discussion and Conclusion
The greater the information asymmetry between owners, investors and stakeholders and capital market factors, the more this will lead to incorrect stock pricing and in the future may create problems for prospective investors and stakeholders and even the companies themselves. At the same time, the greater the involvement of government officials in the capital market, the further the stock price will deviate from its basic principles and intrinsic value, and the interaction of political communication and information asymmetry can intensify incorrect stock pricing. Companies will somehow increase information asymmetry and increase these two incorrect pricing factors. Political communication, by expanding the influence of government officials and owners, can divert information and financial statements of companies from the necessary transparency, and this factor will intensify information asymmetry in the capital market, which will cause the range of bids to fluctuate.
 
Keywords: Information Asymmetry, Incorrect Stock Pricing, Corporate Political Communic

Keywords

References

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Journal of Accounting Advances
Volume 13, Issue 2 - Serial Number 81
December 2021
Pages 387-419

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History

  • Receive Date: 18 October 2021
  • Revise Date: 26 February 2022
  • Accept Date: 26 February 2022

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