The Relationship between Information Asymmetry and Corporate Cash Holdings; Case Study: The Companies Listed in Tehran Stock Exchange

Information asymmetry deals with the study of decisions in transactions where a party has more or better information than the other, providing that this information is efficiently applied when the deal is being transacted. The present study aims to assess 1. the relationship between information asymmetry and cash holdings; 2. the effect of information asymmetry on excess cash and market value. For this purpose, 108 companies among target population of the research- all listed companies on Tehran Stock Exchange- have been sampled. The current study is an ex-post facto and applied research which employed a descriptive correlation method. Desk and field methods have been utilized in order to review related literature. The obtained findings of hypotheses testing indicate that first and second hypotheses cannot be confirmed at significance level of %5. In fact, information asymmetry status in market does not affect cash holdings, and the relationship between excess cash and market value.

Keywords:

cash holdings , information asymmetry