By reviewing the literature, we find a clear gap in studying the effect of corporate governance mechanisms on asymmetric information in general and in the UK capital market in particular. Accordingly, the main objective of this research is to establish a practical guidance for corporate governance mechanisms (internal and external) that can be used to control, mitigate or reduce asymmetric information. The empirical work includes three studies. The first study examines the effect of some corporate governance variables (related to some. internal and external corporate governance mechanisms) on asymmetric information. The second study examines the effect of corporate governance mechanisms using the Institutional Shareholder Services (ISS) indexes' values on asymmetric information. The third study examines if corporate governance variables could be used as predictors for the degree of asymmetric information and for the corporate governance indexes' values. Using a sample of 392 non-financial UK companies listed in the London Stock Exchange from 2003 to 2006, the results of the first study indicated that board and committees' sizes, activities and independence; executive compensation; the number of investors inside the company and debt financing are significantly negatively related to asymmetric information. The ratios of insiders' ownership and block (institutional) ownership are significantly positively related to asymmetric information. The results of the second study indicated that the corporate governance sub-indexes which are related to board, audit, compensation and ownership are significantly negatively related to asymmetric information. Also, corporate governance's general and industry indexes are significantly negatively related to asymmetric information. The negative relations of corporate governance variables and indexes with asymmetric information which resulted from the first and second studies indicated that the higher the quality of corporate governance the lower the degree of asymmetric information. Based on the results of the first and second studies, the results of the third study indicated that corporate governance variables could be used in predicting asymmetric information degree (high or low) and the rates of corporate governance indexes with a higher degree of significance and accuracy. This research has several contributions to make to the financial literature and practices. First, the research examines comprehensively the effect of corporate governance mechanisms on asymmetric information. Second, the research unified the theoretical thinking for corporate governance and asymmetric information under the agency theory. Third, the research examines empirically if the financial ratios which include Volatility, Leverage and Volume are good proxy measures of asymmetric information. Fourth, the idea of measuring the effect of corporate governance as a group of indexes (rather than variables) on the degree of asymmetric information is a new idea and added a new technique in studying the effect of corporate governance on asymmetric information. Fifth, predicting corporate governance indexes' rates and the degree of asymmetric information has added new contributions in the literature of corporate governance and asymmetric information. Accordingly, all stockholders and stakeholders of a company can use these predictions in building their investment and financial strategies. Hence, this adds new dimensions to the studies in the corporate governance area, and also provides a starting point for future research.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:502626 |
| Date | January 2009 |
| Creators | Abdellatif, Ahmed Elbadry Mohamed |
| Publisher | University of Surrey |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://epubs.surrey.ac.uk/681/ |
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