Information asymmetry and firm diversification has been studied by a large size of researchers. Past literatures appear to have a consensus towards diversification increases degree of information asymmetry. This consensus no longer harmonizes since a new finding reveals that diversification alleviates information asymmetry. This paper is based on works of Hadlock et al. (2001), Thomas (2002) and Clarke et al. (2004) whose studies indicate that diversification reduces information asymmetry problem. The hypothesis is re-tested with research and development announcement as previous literatures suggested that R&D activity creates asymmetric information. The result after using event-study to capture abnormal return between focused and diversified firms shows that diversification does not help reduce degree of information asymmetry in case of R&D announcements. The finding is in accordance with previous literatures which argue that diversification increases level of information asymmetry due to differential information among firm’s units and accounting natures. However, a few concerns are to be aware of. First, the methodology used in this study observes only quantity, and not the quality, of the R&D announcements. Second, past R&D performance and firms’ creditability when making announcements are not factored in this analysis given that this is only an initial study.

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