Asymmetric information results when managers of a firm have more information about the firm's operations and future prospects than investors have.

Question

Quizplus · Accepted Answer

Asymmetric information occurs when there is an imbalance in the knowledge between two parties involved in a transaction, and in the case of a firm, it often refers to situations where the managers or insiders possess more information than outside investors or stakeholders. This can lead to issues such as adverse selection, moral hazard, and market inefficiencies.

Asymmetric Information Results When Managers of a Firm Have More