State ownership, probability of informed trading, and profitability potential: Evidence from the Warsaw Stock Exchange

This study examines the probability of informed trading (PIN) for state-owned enterprises (SOEs) and how the market information asymmetry is affected during the COVID-19 crisis. The research challenges the assumption that state ownership is associated with poor governance structures and information transparency by investigating empirical evidence of information asymmetry in SOEs. The study uses the probability of informed trading model to analyse the asymmetry and a dataset of Warsaw Stock Exchange's tick data for the period from September 2013 to February 2021. The study also compares the pre-COVID and COVID-19 periods to examine the change in PIN for state-owned companies during the crisis. Additionally, the study examines the impact of PIN on stock returns and challenges the literature indicating that the PIN is priced and has no impact on returns. The results of the study provide valuable insight into the market dynamics of SOEs and investor behaviour during crisis situations.