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Information ratings and capital structure

Pan, Lee-Hsien, Lin, Chien-Ting, Lee, Shih-Cheng and Ho, Kung-Cheng 2015, Information ratings and capital structure, Journal of corporate finance, vol. 31, pp. 17-32, doi: 10.1016/j.jcorpfin.2015.01.011.

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Title Information ratings and capital structure
Author(s) Pan, Lee-Hsien
Lin, Chien-TingORCID iD for Lin, Chien-Ting orcid.org/0000-0001-6367-3606
Lee, Shih-Cheng
Ho, Kung-Cheng
Journal name Journal of corporate finance
Volume number 31
Start page 17
End page 32
Total pages 16
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2015-04
ISSN 0929-1199
Keyword(s) Information asymmetry
Capital structure
Information ratings
Pecking order theory
Incentive conflicts
Summary We examine the impact of information asymmetry on a firm's capital structure decisions with a unique information rating scheme that draws from 114 measures over five dimensions of information disclosures on each firm from 2006 to 2012. We find that a firm with high (low) information rating is related to low (high) debt financing and leverage. In particular, a firm that moves from the lowest to the highest information rating experiences a 7.8% reduction in firm leverage on average. This relationship is robust to firm characteristics, incentive conflicts, and the agreement theory of Dittmar and Thakor (2007). Our results suggest that information asymmetry is in-fluential on a firm's pecking order behavior independent of these effects.
Language eng
DOI 10.1016/j.jcorpfin.2015.01.011
Field of Research 150201 Finance
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2015, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30078315

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Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact drosupport@deakin.edu.au.