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Financial integration, investor protection and imbalanced optimistically biased information timeliness in emerging markets

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<mark>Journal publication date</mark>1/07/2019
<mark>Journal</mark>International Review of Financial Analysis
Volume64
Number of pages19
Pages (from-to)38-56
Publication statusPublished
Early online date18/04/19
Original languageEnglish

Abstract

Principal-principal conflicts in many emerging markets can lead to an optimistically biased information environment. Using 24 emerging markets during the period 1996–2016, this paper examines how market-level, firm-level financial integration and investor protection quality jointly affect Imbalanced Optimistically Biased Information Timeliness (IOBIT). Results show that financial integration and investor protection quality affect good and bad information timeliness asymmetrically. Market-level financial integration augments IOBIT while firm-level financial integration and investor protection mitigate IOBIT. The effect of firm-level financial integration in mitigating IOBIT is reduced when market-level financial integration increases and/or investor protection becomes stronger. Our analysis enhances our understanding of the benefit-cost trade-off associated with financial integration in affecting information timeliness and the conditional factors in altering this benefit-cost trade-off in emerging markets. © 2019 Elsevier Inc.