Effect of Information Asymmetric on Performance in Business Groups

Abstract

Information asymmetry leads to formation of inefficient information. This inefficiency may affect firm’s performance. One of the main advantages of business groups is lowering the levels of information asymmetry. This study aims at investigating the effect of information asymmetry on performance in business group. To test the research hypothesis, 1395 year-companies from listed companies in the Tehran Stock Exchange in a 10 financial year from 1382 to 1391have been studied. The results indicated that there exists a negative relationship between information asymmetry and the rate of return on assets (ROA) (firm performance). Also, the results showed that firms in business groups have higher ROA than independent firms. Additionally, the firms in variety business groups have higher ROA than the firms in the other business groups. The other findings indicated that the level of information asymmetry in the firms affiliated with business groups is less than that in the independent firms. Also, the rate of information asymmetry in the firms in variety business groups is lower than that in the firms affiliated with the other business groups.

Keywords

• information asymmetry
• business groups
• firm performance