Asymmetric Information and Firm Value During Pandemic Covid-19

Year 2021, Volume: 3 Issue: 1, 27 - 43, 30.06.2021

Arif Budi Satrio

Abstract

The purpose of this study is to investigate the relationship between fundamental factors, asymmetric information, and firm value during the 2020 pandemic by taking samples of 457 non-financial companies listed on the Indonesian Stock Exchange. Two-stage least square testing by controlling the firm’s and industrial characteristics proves that asymmetric information does not have a dominant role in explaining firm value changes during the COVID-19 pandemic. This study also confirms that (1) the disclosure of information through corporate financial reports and foreign investors’ presence still has a dominant role in mitigating information gaps among traders; (2) foreign investors' trading behavior indirectly provides information through their shares' trading flow, which causes a decrease in asymmetric information. This comprehensive empirical testing provides additional evidence regarding asymmetric information and firm value in developing markets during the pandemic.

Keywords

asymmetric information, firm value, firm characteristics, pandemic, COVID-19, emerging markets

Supporting Institution

Ministry of Research and Technology of the Republic of Indonesia

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