We analyze the equilibrium spread when the transaction size of informed traders is elastic in the value of private information (α). We show that the pooling equilibrium is likely to be inefficient when trade size is sensitive to α and the inefficient equilibrium can occur before the market...

In this study we analyze the effect of information asymmetry on corporate cash holdings. Using various measures of information asymmetry, we show that companies that operate in higher information asymmetry environments have smaller cash holdings. We continue to find a negative relation between...