 Asymmetric Information and Debt Financing: Hie Empirical Importance of Size and Balance Sheet FactorsInternational Journal of the Economics of Business, 1997, vol. 4, issue 2, 189-202 Abstract: In an environment with asymmetric information regarding the outcome of investment activities, the premium on external funds is dependent upon a borrower's financial characteristics. Consequently, a borrower's need for funds and accessibility to the desired amount is interlinked. Using panel data over the 1970-89 period, this study finds that a firm's existing level of indebtedness reduces its current net issuance of long term debt. Bigger firm size, higher net worth and a lower sales to asset ratio alleviate this negative effect. The results suggest that the notion of a stronger balance sheet, which governs a firm's access to the capital market, should be extended to include the non-financial sales to asset ratio variable. Keywords: Asymmetric information; Tobin's q; Fixed effects; net worth; Liquidity; Balance sheet, JEL classifications: D82, E22, (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:ijecbs:v:4:y:1997:i:2:p:189-202 Ordering information: This journal article can be ordered from DOI: 10.1080/758516227 Access Statistics for this article International Journal of the Economics of Business is currently edited by Eleanor Morgan More articles in International Journal of the Economics of Business from Taylor & Francis Journals |
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