Chien-Ting Ed Lin Seminar
- Topic: Information ratings and capital structure
Professor Chien-Ting Ed Lin, School of Accounting, Economics & Finance, Deakin University
- Venue:E4A 623
- When: 24th October, 2014, (Fri)
- Time: 11am - 12pm (Morning Tea from 10.30am)
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 influential on a firm's pecking order behaviour independent of these effects.