Information Asymmetry and Investor's Financial Behavior: A Mediation of Perceived Risk and Perceived Failure

Abstract

This study aims to investigate the influence of information asymmetry on the financial behavior of investors in the Pakistan Stock Exchange (PSX), utilizing the Theory of Planned Behavior (TPB) and Information Asymmetry. Additionally, the study explores the mediating role of Perceived Risk (PR) and Perceived Failure (PF) in the relationship between information asymmetry and negative affect (NA). The present study used a quantitative research methodology and a cross-sectional research design to gather data at a single point in time. The random sampling technique is employed. The researchers adopt a five-point Likert scale to collect data from the participants. The acquired data is evaluated using this study's smart partial least squares (PLS 3) method. Smart (PLS 3) allows us to break down the analysis into two primary sections. In the first section, we evaluate the measuring framework. The second section involves a structural model evaluation. This survey received 151 responses from PSX investors. A direct relationship was observed between knowledge asymmetry, perceived risk, and perceived failure. A pessimistic attitude exhibits a negative correlation with one's financial behavior. The study's results supported that investors' behavior in the financial markets could be significantly limited by information asymmetry and its various aspects. Finally, the study concludes with a discussion of its limits, recommendations for further investigation, and theoretical, methodological, and practical consequences.