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Information asymmetry and the effect of financial openness on firm growth and wage in emerging markets

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  • Park, Haehean
  • Lee, Po-sang
  • Park, Yun W.
Abstract
We examine whether the effect of financial openness on firm growth and wages depends on information asymmetry faced by foreign investors. We conduct a firm-year level panel regression analysis using 25 emerging market country panels for 1990–2011. We find that financial openness favors firms with lower information asymmetry (larger firms, cross-listed firms, export intensive firms), which grow faster than firms with higher information asymmetry. Further, financial openness leads to a widened wage difference between large and small firms. Finally, the asymmetric growth of large firms relative to small firms disappears as the information environment of the host country improves.

Suggested Citation

  • Park, Haehean & Lee, Po-sang & Park, Yun W., 2020. "Information asymmetry and the effect of financial openness on firm growth and wage in emerging markets," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 901-916.
    • Handle: RePEc:eee:reveco:v:69:y:2020:i:c:p:901-916
    DOI: 10.1016/j.iref.2020.06.004
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