HARANAHALLI RAMASWAMY INSTITUTION

OF HIGHER EDUCATION

Presentation on:
Information Asymmetry and the
Markets for Corporate Securities

Submitted To
Mrs Prathima Girish
Department of management
HRIHE hassan
ECONOMIC THEORIES OF THE EFFECTS OF
INFORMATION ASYMMETRY
 Akerlof: Information Asymmetry and the Market for
Lemon
1. Moral Hazard
2. Pooling Equilibrium
3. Adverse Selection
4. Screening
5. Certification, costly signaling, and the separating
equilibrium
6. Reputation
7. Contract enforcement
8. Guarantees

 Spence: Job Market Signaling

INFORMATION ASYMMETRY AND DIVIDEND
POLICY

 Bhattacharyar signaling with dividend

 Miller and Rocks: the Signaling Power of Cash Payouts
THE BASIC CAUSE OF INFORMATIONASYMMETRY
IN THE MARKETS FOR CORPORATE SECURITIES
 Further emphasis the critical role of management in a
firm with diffuse ownership
 Raises questions about the informativeness of the
market values of the firm’s securities
 May effect the firm’s optimal ownership structure and
governance
 Can effect several aspects of the firm’s financial policies
and strategies