Information Asymmetry and Stock Market Participation: Evidence from the Uganda Stock Exchange

Abstract

This study sought to examine the association between information asymmetry and perceived stock market participation by medium firms. A sectional survey and correlational analysis approach were employed based on a sample of 118 business tax-payers with annual chargeable incomes above Shs. 50m [USD 17,241] located within Kampala City, the heart of commercial activities in the country. Findings indicate that there is a positive and significant association between information asymmetry 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 of African literature made it difficult to corroborate the current study findings. Nonetheless, this study contributes to the dearth of evidence on stock market participation literature in Africa by investigating for the first time, the association between information asymmetry and perceived stock market participation by medium firms in Uganda. There is need for more research in the same area in developing countries to test the robustness of the model. To the practitioners and policy makers, this study suggests that the Ugandan Capital Market Authority should make information about its operations more available so as to make it highly familiar to the general public. This will go a long way in making the stock market an alternative financing option, especially in this era of rising costs of capital provided by other financial intermediaries