The interaction between stock market development and moral hazard and adverse selection asymmetric information Based on Probability of Informed Trade

Document Type : Original Article

Authors
mohamadreza mohamadi 1
reza nazari 2
Mehdi Moradzadefard 3
1 Ph.D. Student of Accounting, Karaj Branch, Islamic Azad University, Alborz, Iran
2 Assistant Professor of Accounting, Karaj Branch, Islamic Azad University, Alborz, Iran.
3 Associate Professor of Accounting, Karaj Branch, Islamic Azad University, Karaj, Iran
10.30495/jik.2025.23669
Abstract
In this article, we studied the impact of adverse selection and moral hazard as an example of information asymmetry on the development of stock market. Following the surge in financial scandals, the need to quality of accounting information become inevitable ; Misusing the earning data is a common mechanism that is used to misrepresent the achievement of goals which is mainly executed through the discretionary accruals quality ; here we used the modified Dechow & Dichev model (2002) to calculate the moral hazard from the criterion of accrual quality we also used the “microstructure model transactions probability of informed trading “for High frequency data series to calculate the adverse selection, we calculated the development of stock World bank standards . Once all the variable are calculated; we deployed the vector- Autoregression (VAR), model for an optimum interval of 2009 to 2019 over the financial data base of 280 companies listed on the stock exchange market to verify the interactionThe results shows a meaningful interaction between the information asymmetry such as moral hazard and adverse selection and the development of stock market.
Keywords
Stock market development
adverse selection
moral hazard .probability of informed trade
Vector autoregression
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