EFFECT OF ASYMMETRIC INFORMATION ON THE PERFORMANCE OF LISTED MANUFACTURING COMPANIES
Journal Title: European Journal of Business and Social Sciences - Year 2016, Vol 5, Issue 6
Abstract
Firms with high growth opportunity and superior performance are associated with level of information asymmetry (Chiyachantana, 2013). With respect to type of information, firms with superior operating performance, high growth opportunity are likely to disclose the investment and structural change as well as legal and miscellaneous information. The general objective of the study was to analyse the effect of information asymmetry on the performance of listed manufacturing companies in Rwanda. Specific objectives were to analyse the effect of moral hazard asymmetric information on the performance of manufacturing companies in Rwanda; to analyse the influence of adverse selection asymmetric information to the performance of manufacturing companies in Rwanda; to determine the correlation between cost forecast asymmetric information and performance of manufacturing companies in Rwanda. BRALIRWA and other manufacturing companies received recommendations and suggestions concerning asymmetric information and performance of the company according to the research findings. This research use both correlational and analytical research designs, the target population of this research was 128 employees from seven departments of BRALIRWA Ltd related to the research topic, where sample size of 79 employees obtained using Yamane formula. The 79 were selected using purposive sampling technique in order to get the most appropriate respondents. The researcher used the primary and the secondary sources during the data collection, where by questionnaires were used. This descriptive statistics used in this research were percentages and frequencies, Correlational and regression analysis were also used as inferential statistics to establish the relationship between variables. The researcher used Statistical Packaging for Social Sciences (SPSS) version 16 in this study to analyze and present data. In relation to the first research objective, this research found that the coefficient r betweenmoral hazard asymmetric information and performance of manufacturing companies equal to 0.980. This leads to confirm that there is significant relationship between moral hazard asymmetric information and performance of BRALIRWA. In relation to the second research objective, the study found that the coefficient r equal to 0.986. This leads to confirm that there is significant positive relationship between adverse selection asymmetric information and performance of BRALIRWA. In relation to the third research objective, this research found that the coefficient r equal to 0.971. This leads to confirm that there is significant correlation between cost forecast asymmetric information and performance of BRALIRWA. This study concluded that the performance disadvantage of less powerful buyers was less pronounced in BRALIRWA when the buyer had detailed information and this result can be explained by the buyer’s negotiation behavior. It is recommended for all registered manufacturing companies that decision to introduce to financial management information needs to be accompanied by strong commitment, sufficient manpower and financial resources, widespread internal support, and an agenda for effective communication. Basing on the findings related to the problems as well as the theoretical aspects presented in the literature review this research recommends manufacturing companies of Rwanda to speed up the campaign to focus on the management of asymmetric information as among the best tool to the profitability of manufacturing companies.
Authors and Affiliations
Monica Ndagijimana. Dusabe| Student at Jomo Kenyatta University of Agriculture and Technology, Julius Warren Kule. | Lecturer at Jomo Kenyatta University of Agriculture and Technology, Oluoch Joseph Oluoch| Lecturer at Jomo Kenyatta University of Agriculture and Technology
Keywords
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