Exploratory Analysis of the Heterogeneity in the Relationship between Information Asymmetry and the Cost of Equity Capital: A Meta-Analytic Approach
Several empirical studies have tested the relationship between information asymmetry and the cost of equity capital and have reported conflicting results. Some studies evaluate this relationship as positive, some as negative, and some as insignificant. The discovery of divergence factors has an effective role in managing information asymmetry, the cost of equity capital, and shareholder wealth. In this study, this issue is followed by the meta-analysis approach. This meta-analysis was carried out in seven stages. For this meta-analysis, 36 studies published between 1986 and 2022 from journals with an H index at least equal to 1 of SCOPUS were used. The number of samples is 260 tests which were extracted from the mentioned studies. Using CME2 software, divergence test, and one-sample t-test with random effects approach in addition to testing 12 hypotheses, the robustness check of the results was tested based on 18 categories of analysis, of which 15 categories confirmed the robustness. The results showed that information asymmetry affects the cost of equity capital. All dimensions of information asymmetry affect the cost of equity capital, except analysts’ quality and income volatility. In addition, information asymmetry has a positive effect on all dimensions of the cost of equity capital.
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