Question

What does information asymmetry refer to?

1) An imbalance of information among stockholders in a company.
2) An imbalance of information between the auditor and the management of the company.
3) An imbalance of information between stockholders and the management of the company.
4) An imbalance of information between the auditor and the stockholders of the company.

Answer 1

Information asymmetry refers to an imbalance of information between stockholders and the management of a company.

Step-by-step explanation:

Information asymmetry refers to an imbalance of information between stockholders and the management of a company. In this case, one party (either the stockholders or the management) possesses more information than the other party. This imbalance can create challenges in decision-making and may lead to conflicts of interest.