Information asymmetry is a key factor during financial crises. In this Vox Views video, Thomas Gehrig compares the 1907 and 2007 crises and finds common patterns. Information is a driver of crises and of market liquidity. In periods of stress, finding liquidity is difficult and illiquidity increases mostly because of information. The video was recorded in April 2016 at the First Annual Spring Symposium on Financial Economics organised by CEPR and the Brevan Howard Centre at Imperial College.
Thomas Gehrig, 06 May 2016
Alex Edmans, William Mann, 15 February 2014
All firms need capital. Much research addresses the choice between issuing various types of securities – for example, between issuing debt and equity. However, another method of financing has received relatively little attention – selling non-core assets, such as property, divisions, or financial investments. This article explains the conditions under which an asset sale is the preferred means of raising capital, and highlights how a manager should go about deciding between selling assets and issuing securities.
James Choi, Hongjun Yan, 25 January 2013
Security-market regulations often seek to ensure that all investors have equal access to information about each company. But what are the actual costs of an unequal information playing field? This column reviews evidence from China, Finland, and the US, suggesting that information asymmetry raises companies’ cost of capital. This inhibits investment and thereby long-run economic growth.