The Relationship between Corporate Disclosure Adequacy and Bid-Ask Spread in the Capital Market of Iran

The capital market is an appropriate place for investing and leading the rigid funds in most of the developed countries. The decisions made without required information in the capital market brings about information asymmetry and a slow trend in a transaction which will finally make the transaction unfair. According to the theoretical concepts, information transparency is an approach to mitigate the information asymmetry that is resulted from increasing the disclosure level because of the regulations in accounting. The present study is designed and performed in order to examine the corporate disclosure score with the information asymmetry of the Tehran Stock Exchange. We have selected 60 firms according to the systematic sampling for a six year (2004-2009) period. The required data about these firms have been collected and analyzed. Corporate disclosure score has been used to measure the adequate disclosure. The information asymmetry has been examined by the bid-ask prices. Multivariate pooled regression is the statistical method used to test the hypotheses. The findings demonstrate that there is a significant negative relationship between the disclosure adequacy and the information asymmetry.