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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26743
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| Title: | Capital Structure with Asymmetric Information about Value and Risk:
Theory and Empirical Analysis |
| Authors: | Halov, Nikolay
Heider, Florian |
| Issue Date: | 3-May-2004 |
| Series/Report no.: | S-CDM-03-17 |
| Abstract: | The paper presents a simple model arguing that the pecking order theory
is an extreme when there is only asymmetric information about value. We
show how asymmetric information about both, value and risk, transforms
the adverse selection logic underlying the pecking order into a general
theory of capital structure that accounts for both debt and equity
issues. The model predicts that firms issue more equity and less debt if
there is more asymmetric information about risk relative to value. We
find robust empirical support for the prediction and document a strong
link between risk and capital structure in a large unbalanced panel of
publicly traded US firms from 1971 to 2001. |
| URI: | http://hdl.handle.net/2451/26743 |
| Appears in Collections: | Credit & Debt Markets
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