Asymmetric information involves a situation where the firm's managers have different (better)information about their firm's prospects than do investors.

Question

Quizplus · Accepted Answer

Asymmetric information refers to a situation where one party in a transaction has more or better information than the other party. In the case of a firm, managers have access to more detailed and current information about the company's operations, financials and future prospects than investors or the public. This can lead to informational advantages and disadvantages, mispricings, or market inefficiencies.

Asymmetric Information Involves a Situation Where the Firm's Managers Have