InformationAsymmetry and Stock Market Participation: Evidence from the Uganda Stock Exchange

Abstract

This study sought to examine the association between informationasymmetry and perceived stock market participation by medium firms.A sectional survey and correlational analysis approach were employedbased on a sample of 118 business tax-payers with annual chargeableincomes above Shs. 50m [USD 17,241] located within Kampala City,the heart of commercial activities in the country. Findings indicate thatthere is a positive and significant association between informationasymmetry and perceived stock market participation by medium firms.Specifically, findings reveal that what matters is information quality.Nonetheless, information quantity counts to a lesser extent. Paucity ofAfrican literature made it difficult to corroborate the current studyfindings. Nonetheless, this study contributes to the dearth of evidenceon stock market participation literature in Africa by investigating for  the first time, the association between information asymmetry andperceived stock market participation by medium firms in Uganda. Thereis need for more research in the same area in developing countries totest the robustness of the model. To the practitioners and policy makers,this study suggests that the Ugandan Capital Market Authority shouldmake information about its operations more available so as to make ithighly familiar to the general public. This will go a long way in makingthe stock market an alternative financing option, especially in this eraof rising costs of capital provided by other financial intermediaries.Keywords: Information asymmetry, Information quality, Information quantity,Stock market participation