Viktoriya Cherkasova1, Regina Dunyasheva2
  • 1 National Research University Higher School of Economics, 20 Myasnitskaya Str., Moscow, 101000, Russian Federation
  • 2 LUKOIL Lubricants Company Ltd., 6, Malaya Yakimanka st., Moscow, 119180, Russian Federation

Value-enhancing Capital Budgeting in Terms of Information Asymmetry

2016. Vol. 20. No. 4. P. 655–690 [issue contents]

We investigate the phenomenon of asymmetric information that is typical in both developed and emerging markets. The purpose of this paper is to explore the impact of asymmetric information on the value-enhancing capital budgeting in emerging markets.

This study examines three measures of asymmetric information – general return variation, firm-specific return variation and stock price delay. We apply the deviation of a firm's estimated marginal Tobin's q from a benchmark as an indicator of effective capital budgeting. Finally the impact of asymmetric information on the value-enhancing capital budgeting has been analyzed.

Research was conducted with 1080 listed BRIC companies from 2005–2014. The key findings of the paper are: stock price informativeness measured by daily general return variation and daily firm-specific return variation has a significant influence of investment performan­ce. We find that the high level of investment opportunities and financial constraints lead to less efficient investment decisions. Moreover industry analysis reveals that the high peers’ stock price informativeness measured by weekly general return variation and weekly firm-specific return variation lets managers to improve the corporate value.

Our study contributes to emerging literature on the determination of relevant investment model by showing that managers can improve the investment efficiency and investors can decrease the risks of personal investments. In addition, this study provides additional evidence on the agency problem that affects firms' investment decisions.

The analysis concludes that the necessity to reduce the level of information asymmetry is one of the key components of the corporate value maximization that would increase the corporate attractiveness to investors.
Citation: Cherkasova V., Dunyasheva R. (2016) Investitsionnye resheniya kompaniy v usloviyakh asimmetrii informatsii [Value-enhancing Capital Budgeting in Terms of Information Asymmetry]. HSE Economic Journal , vol. 20, no 4, pp. 655-690 (in Russian)
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