Information asymmetry raises the cost of capital for corporations
James Choi, Hongjun Yan, 25 January 2013
Security-market regulations often seek to ensure that all investors have equal access to information about each company. But what are the actual costs of an unequal information playing field? This column reviews evidence from China, Finland, and the US, suggesting that information asymmetry raises companies’ cost of capital. This inhibits investment and thereby long-run economic growth.