ICT and Information Asymmetry; New Evidence of the Financial System in Selected MENA Countries

Authors

Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran

Abstract

The present study aims to investigate the role of ICT in reducing the effect of information asymmetry on financial development. The research's data associated with the selected countries of MENA during the timeframe of 2004-2015 are extracted from the official sources. Then, the research model is evaluated in the short- and long-term using the dynamic generalized method of moments and FMOLS, respectively. First, the results show information asymmetries negatively affect financial development. Second, ICT reduces but cannot eliminate the negative effect of information asymmetry on financial development. Third, the threshold effect of ICT on the information asymmetry and thus on financial development was within the minimum and maximum ICT indices. Due to the role of ICT in reducing the information asymmetry in the financial system of the examined countries, the policy proposal of this paper is to expand the various areas of access, benefit, and use of ICT in the financial sector.

Keywords


Aboody, D., & Lev, B. (2000). Information Asymmetry, R&D, and Insider Gains. The Journal of Finance55(6), 2747-2766.
Akerlof, G., Spence, M., & Stiglitz, J., (2001). Markets with Asymmetric Information. Retrieved from https://ideas.repec.org/p/ris/nobelp/2001_002.html
Albertazzi, U., Eramo, G., Gambacorta, L., & Salleo, C. (2015). Asymmetric Information in Securitization: An Empirical Assessment. Journal of Monetary Economics71, 33-49.
Arellano, M., & Bover, O. (1995). Another Look at the Instrumental Variable Estimation of Error-components Models. Journal of Econometrics68(1), 29-51.
Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies58(2), 277-297.
Asongu, S. A., & Moulin, B. (2016). The Role of ICT in Reducing Information Asymmetry for Financial access. Research in International Business and Finance38, 202-213.
Asongu, S. A., Nwachukwu, J. C., & Tchamyou, V. S. (2016). Information Asymmetry and Financial Development Dynamics in Africa. Review of Development Finance6(2), 126-138.
Asongu, S. A. (2018). Conditional Determinants of Mobile Phones Penetration and Mobile Banking in Sub-Saharan Africa. Journal of the Knowledge Economy9(1), 81-135.
Baldwin, A. A., & Trinkle, B. S. (2011). The Impact of XBRL: A Delphi Investigation. The International Journal of Digital Accounting Research11(1), 1-24.
Baltagi, B. H. (2005). Econometric Analysis of Panel Data. New York: John Wiley and Sons Inc.
Banerji, S., & Basu, P. (2017). Universal Banking, Asymmetric Information and the Stock Market. Economic Modelling60, 180-193.
Blundell, R., Bond, S., & Windmeijer, F. (2001). Estimation in Dynamic Panel Data Models: Improving on the Performance of the Standard GMM Estimator. London: Emerald Group Publishing Limited.
Boateng, A., Asongu, S., Akamavi, R., & Tchamyou, V. (2018). Information Asymmetry and Market Power in the African Banking Industry. Journal of Multinational Financial Management44, 69-83.
Boyd, J. H., Levine, R., & Smith, B. D. (2001). The Impact of Inflation on Financial Sector Performance. Journal of monetary Economics47(2), 221-248.
Brown, M., Jappelli, T., & Pagano, M. (2009). Information Sharing and Credit: Firm-level Evidence from Transition Countries. Journal of Financial Intermediation18(2), 151-172.
Brown, M., & Zehnder, C. (2010). The Emergence of Information Sharing in Credit Markets. Journal of Financial Intermediation19(2), 255-278.
Busuioc, A., & Birau, C. (2010). The Role of Reserve Currencies in the World Economy. Retrieved from https://www.ceeol.com/search/article-detail?id=102458
Claus, I. (2011). The Effects of Asymmetric Information between Borrowers and Lenders in an Open Economy. Journal of International Money and Finance30(5), 796-816.
Claus, I., & Grimes, A. (2003). Asymmetric Information, Financial Intermediation and the Monetary Transmission Mechanism: A Critical Review. Retrieved from https://www.econstor.eu/bitstream/10419/205524/1/twp2003-19.pdf
Dehesa, M., Druck, P., & Plekhanov, A. (2007). Relative Price Stability, Creditor Rights, and Financial Deepening. Creditor Rights, and Financial Deepening, Retrieved from IMF Working Paper.
Djankov, S., McLiesh, C., & Shleifer, A. (2007). Private Credit in 129 Countries. Journal of Financial Economics84(2), 299-329.
Eaton, B.C., Eaton, D. F., & Allen, D. W. (2005). Microeconomics: Theory with Applications. New Jersey: Pearson Prentice Hall.
Focarelli, D., Pozzolo, A. F., & Casolaro, L. (2008). The Pricing Effect of Certification on Syndicated Loans. Journal of Monetary Economics55(2), 335-349.
George, A., (1970). The Market for Lemons: Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics,84, 488-500.
Gu, Q., Jitpaipoon, T., & Yang, J. (2017). The Impact of Information Integration on Financial Performance: A Knowledge-based View. International Journal of Production Economics191, 221-232.
Gupta, P., Tressel, T., & Detragiache, E. (2005). Finance in Lower Income Countries: An Empirical Exploration. Retrieved from International Monetary Fund.
Hawkins, R. J., Aoki, M., & Frieden, B. R. (2010). Asymmetric Information and Macroeconomic Dynamics. Physica A: Statistical Mechanics and its Applications389(17), 3565-3571.
Houston, J. F., Lin, C., Lin, P., & Ma, Y. (2010). Creditor Rights, Information Sharing, and Bank Risk Taking. Journal of Financial Economics96(3), 485-512.
Huybens, E., & Smith, B. D. (1999). Inflation, Financial Markets and Long-run Real Activity. Journal of Monetary Economics43(2), 283-315.
---------- (1998). Financial Market Frictions, Monetary Policy, and Capital Accumulation in a Small Open Economy. Journal of Economic Theory81(2), 353-400.
Ivashina, V. (2009). Asymmetric Information Effects on Loan Spreads. Journal of Financial Economics92(2), 300-319.
Jappelli, T., & Pagano, M. (2002). Information Sharing, Lending and Defaults: Cross-country Evidence. Journal of Banking & Finance26(10), 2017-2045.
Jones, A., & Willis, M. (2003). The Challenge of XBRL: Business Reporting for the Investor. Balance Sheet, 11, 29-37.
Kabiriparvizi, B., (2008). The Role of Information and Communication Technology on Life Insurance Development. Electronic Journal of Mellat Insurance, 1(1), 23-34 (In Persian).
McDonald, M. C. A., & Schumacher, M. L., (2007). Financial Deepening in Sub-Saharan Africa: Empirical Evidenceon the Role of Creditor Rights Protection and Information Sharing. Retrieved from International Monetary Fund.
Myers, S. C., & Majluf, N. S. (1984). Corporate Financing and Investment Decisions when Firms Have Information that Investors do not Have. Journal of Financial Economics13(2), 187-221.
Pradhan, R. P., Arvin, M., Nair, M., Bennett, S., & Bahmani, S. (2017). ICT-Finance-Growth Nexus: Empirical Evidence from the Next-11 Countries. Cuadernos de Economía40(113), 115-134.
Spence, M. (1978). Job Market Signaling (281-306). In Uncertainty in Economics. Massachusetts: Academic Press.
Stiglitz, J. E., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information. The American Economic Review71(3), 393-410.
Sufi, A. (2007). Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans. The Journal of Finance62(2), 629-668.
Triki, T., & Gajigo, O. (2014). Credit Bureaus and Registries and Access to Finance: New Evidence from 42 African Countries. Journal of African Development16(2), 73-101.
Zagorchev, A., Vasconcellos, G., & Bae, Y. (2011). Financial Development, Technology, Growth and Performance: Evidence from the Accession to the EU. Journal of International Financial Markets, Institutions and Money21(5), 743-759.