The Effect of Asymmetric Information on Foreign Investor Decision-Making in Nigeria’s Capital Market

This study investigates the effect of information asymmetry on the decision-making behaviour of foreign investors in Nigeria's capital market, examining how information gaps between domestic issuers and foreign portfolio investors affect foreign investment volumes, holding periods, and asset allocation patterns on the Nigerian Exchange Group. Information asymmetry is a persistent structural challenge in emerging market capital markets, where disclosure standards, analyst coverage quality, and corporate governance transparency often lag behind developed market benchmarks. The research employs a quantitative design using daily trading data from the Nigerian Exchange Group disaggregated by investor category, combined with quarterly foreign portfolio investment statistics from the Securities and Exchange Commission for the period 2018 to 2023. Panel regression analysis and event study methodology are applied to measure the sensitivity of foreign investor participation to information disclosure events and analyst report releases. The theoretical framework draws on the adverse selection model of Akerlof, signalling theory, and the international market microstructure literature. The study also incorporates survey data from 25 foreign portfolio fund managers on their information sourcing strategies and perceived information quality in the Nigerian market. Findings are expected to reveal that information asymmetry significantly reduces foreign investor holding periods and biases allocation toward highly liquid large-cap stocks with broader international analyst coverage. Recommendations include enhanced mandatory disclosure requirements, incentives for international credit ratings coverage, and development of a dedicated foreign investor relations platform for Nigerian listed companies. Keywords: information asymmetry, foreign investors, capital market, Nigeria, portfolio investment