Information asymmetry and its effects on the capital market

Abstract

The basis for decision-making by capital market participants is information disseminated by companies. Utilizing this information and making the right decision is possible when the mentioned information is provided in a timely manner, relevant, complete, accurate and understandable. On the other hand, accessibility method to information is also very important. If the transfer of information is uneven and asymmetric between individuals and the so-called information asymmetry occurs, it can cause different results for a single subject. Since this phenomenon has various adverse consequences such as reduced market efficiency, increased transaction costs, minimal investor participation, market weakness, low liquidity and generally reduced profit from trading in capital markets. This research is studied by the review-description method. Firstly, the concept of information asymmetry and its effects on the capital market and secondly strategies to reduce information asymmetry, are discussed.

Keywords

• information asymmetry
• capital market
• wrong choice
• moral hazard
• efficient market