Pecking order, access to public debt market, and information asymmetry

Carl Hsin-han Shen

International Review of Economics & Finance, 2014, vol. 29, issue C, 291-306

Abstract: We suggest that the limited access to the public debt market is a reason for the violations of pecking order behavior documented in literature. We show that as information asymmetry increases, two effects take place. On the one hand, firms do desire to increase the debt issuance. On the other hand, firms start to lose their access to the public debt market. As a result, firms associated with high degrees of information asymmetry can only issue private debt and face the relatively low debt capacities provided in the private debt market.

Keywords: Capital structure; Pecking order; Public debt market; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:29:y:2014:i:c:p:291-306

DOI: 10.1016/j.iref.2013.06.002

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