Information asymmetry, leverage and firm value: Do crisis and growth matter?

By S. Fosu, A. Danso, Wasim Ahmad, William Coffie. 2016

193 citations recorded by the source corpus.

Drawing on pecking order and agency cost theories, we assess the extent to which information asymmetry is an important determinant of firm value and the extent to which this relationship is conditional on the leverage level of firms. We also assess the impact of information asymmetry on firm value during the pre and post 2007/09 financial crisis period and for high and low growth opportunity firms. Using a large sample of UK firms, our empirical findings suggest that information asymmetry adversely impacts firm value, and that this effect decreases with firm's leverage. We also find that leverage has a negative effect on firm value, and that the marginal effect of leverage is lower for information asymmetric firms. Further, we find that the relation between information asymmetry and firm value is more pronounced in the post-crisis period than the pre-crisis period. Finally, we show that the impact of information asymmetry on firm value is higher (lower) for firms with high (low) growth opportunities.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/db2067c1668f436d967934a1e578ad8fab14f5c6

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In Accounting

1. Mengling Zhou
2. Kexin Li
3. Zhongfei Chen

In Finance

1. Mengling Zhou
2. Kexin Li
3. Zhongfei Chen

Citations in the corpus

• Corporate governance quality and financial leverage: Evidence from China (2020, background): “, 2015), and financial performance (Ryu & Yoo, 2011; Fosu et al., 2016).”