Investigating the Impact of Disclosure Quality and Voluntary Disclosure on Information Asymmetry in Tehran Stock Exchange

Abstract
The current study aimed at investigating the impact of disclosure quality and voluntary disclosure on Information asymmetry of the companies listed in Tehran Stock Exchange. Accordingly, statistical sample including 84 companies listed in Tehran Stock Exchange were studied in a time period of 2006 to early 2016 using Panel regression. In this study, the relationship between voluntary disclosure and Information asymmetry criteria including the domain of difference of bid and offer prices, cash stock and the error of predicting interest as well as the relationship between the rate of disclosure quality and Information asymmetry were examined. In order to examine the normality of data, Kolmogorov-Smirnov Test was used. Significance level of the test for the variables of the domain of difference of bid and offer prices, the error of predicting interest, growth, return on assets and financial leverage was normalized using Johnson Method. Finally, the model was estimated and the results of the study showed a meaningful relationship between voluntary disclosure of information and the rate of disclosure quality with cash stock, but there was not a meaningful relationship between voluntary disclosure of information and the rate of disclosure quality with two other criteria. Based on the results obtained, the released information from companies should be presented orally so that investors could have more tendencies to invest in Stock Exchange. Therefore, the role of Stock Exchange in compelling companies to present clear information gets more and more important
 
 
Introduction
The availability of appropriate information is one of the factors influencing the decision making process. The distribution of required information asymmetrically among individuals can produce different results. Therefore, although information can be important to the decision maker, however, we need to carefully assess the quality of information distribution (Diamond and Verechia, 1991). Hence, the information asymmetry leads to various adverse consequences such as increased transaction costs, market weakness, low liquidity, and, in general, a reduction in the profits from transactions in the capital market. These undesirable outcomes can be modulated by disclosing and clarifying the financial information to reduce the information asymmetry. With regard to the information disclosure process, investors (traders) face the problem of information asymmetry. This problem arises when one of the parties to the transaction has more information than the other party (Davani and Moini, 2007). The improper information issues result from information asymmetry and conflicting incentives for the investors and managers. This will bring about chaos to the capital market performance. Some of the measures taken to reduce these issues are as follows:

First, optimal contracts between companies and investors increase the incentive for managers to fully disclose information and leads to a reduction in the misleading evaluations.
Secondly, establishing the regulations to bind the managers to fully disclose information will reduce the problem of information asymmetry.
Thirdly, these unfavorable issues may be diminished through effective intermediary information such as the views of analysts and the institutions determining the credit rating of the companies (Izadinia and Soroush Yar, 2009).

Case study
The study statistical population included all the companies listed in Tehran Stock Exchange.

Materials & Methods

This research was an applied and correlational study. The research project was a quasi-experimental one, which was conducted by using a retrospective approach (through previous information). In this research, we used Tehran Stock Exchange databases, audited financial statements and Rahavard Novin software to collect data and information. Data analysis and testing the research hypotheses along with their results were done according to the outputs obtained from the Eviews software Ver. 9.
Discussion and Results
This research was aimed to answer the following question:

What is the effect the quality of information disclosed by companies on the information asymmetry in Tehran Stock Exchange Companies?

In this regard, six sub-hypotheses were developed by using the voluntary disclosure criterion and the quality rating of information disclosure to answer the research questions. The summary of the results is as follows:
The first sub-hypothesis of this study examined the relationship between the score of voluntary disclosure of information and the range of the proposed price difference for the purchase and sale of shares. According to the regression results, the significance of the coefficient related to the independent variable of information disclosure was 0.7877, suggesting a lack of significant relationship between these two variables. As a result, the first sub-hypothesis is not verified, which is consistent with the results of Khajavi and Alizadeh Talatapeh research (2014) and contradicts the results of Gao and Zhou (2015) study.
The second sub-hypothesis evaluated the relationship between the score of voluntary disclosure of information and the liquidity of the stock shares with the criterion of frequency of transactions. The coefficient of the independent variable of disclosure rating in this test was negative and significant (equal to 0.000). As a result, the second sub-hypothesis was accepted. It should be noted that the initial assumption about the relationship between the disclosure of information and liquidity of shares was the presence of a positive relationship between these two variables, while the test results proved the opposite. One of the possible reasons for this issue may be the inefficiency even at a weak level of the Tehran Stock Exchange. The studies conducted in relation to the efficiency of the Tehran Stock Exchange market confirm its ineffectiveness.
The third sub-hypothesis of the study was to investigate the relationship between the score of voluntary information disclosure and the earnings forecast error. Regarding the regression test and the significance of the coefficients, this hypothesis was not accepted and no significant relationship was found between the score of voluntary information disclosure and the earnings forecast error.
The fourth sub-hypothesis of this study examined the relationship between the score of voluntary information disclosure and the range of the proposed price difference for the purchase and sale of shares. Based on the results of regression, the significance of the coefficient of the independent variable of disclosure of information was equal to 0.003, suggesting the lack of significant relationship between these two variables. As a result, the fourth sub-hypothesis was not confirmed.
The fifth sub-hypothesis of the study was to investigate the relationship between the score of voluntary information disclosure and the stock liquidity. The independent variable coefficient of disclosure rank in this test was negative and significant (equal to 0.000). Accordingly, the fourth sub-hypothesis was accepted. This result was similar to that of the second sub-hypothesis.
Finally, the sixth sub-hypothesis of the research investigated the relationship between the score of voluntary information disclosure and the earnings forecast error. Due to the regression test and the significance of the coefficients, this hypothesis was not also accepted and no significant relationship was seen between the information disclosure rate and the earnings forecast error. Since no similar studies have been done on the relationship between disclosure quality and information asymmetry by the above computational approach, consequently, no comparison can be made with other studies.
Comparing the results of the two variables of voluntary disclosure score and the rating of information disclosure quality revealed that these two variables have had the same effects on the three dependent variables in this study. The effect of both variables on the stock liquidity is inverse and significant, while their effect on the earnings forecast error is positive and insignificant. The effect of these two variables on the difference range of the proposed price is positive but not significant. According to the obtained results, the information provided by the companies should be presented in a transparent manner so that the investors will be more willing to invest in the securities. Hence, the role of the Stock Exchange Organization becomes increasingly important in requiring the companies to provide transparent information. In addition, more serious laws should be established by the government to bind the companies for providing early and more accurate information. Along with regarding the financial statements and internal information of the companies, the investors should also pay further attention to the outsourcing information and consider such information in their analyses.