Changes in Corporate Debt Policy: Information Asymmetry and Agency Factors

This paper tests how changes in information asymmetry and agency variables affect changes in debt policy. Unlike previous studies that examine levels of variables to explain what may determine debt policy, we calculate yearly changes in variables to provide a stronger test of causal relations. By ex...

Full description

Saved in:
Bibliographic Details
Published inManagerial finance Vol. 22; no. 2; pp. 1 - 15
Main Authors Crutchley, Claire E, Jensen, Marlin R.H
Format Journal Article
LanguageEnglish
Published Patrington MCB UP Ltd 01.02.1996
Emerald Group Publishing Limited
Subjects
Asymmetry
Bankruptcy
Capital structure
Cash flow
Cash flow forecasting
Corporate debt
Costs
Debt financing
Equity
Hypotheses
Institutional investments
Profitability
Studies
United States > US
Online AccessGet full text

Cover

More Information
Summary:This paper tests how changes in information asymmetry and agency variables affect changes in debt policy. Unlike previous studies that examine levels of variables to explain what may determine debt policy, we calculate yearly changes in variables to provide a stronger test of causal relations. By examining changes in agency and information variables, we are able to identify factors that cause firms to change their optimal capital structure. We find institutional ownership has become a substitute for debt financing due to increased shareholder activism. In addition, we find support for Jensen's free cash flow theory, mixed support for informational asymmetry, and no support for Jensen and Meckling's agency model.
Bibliography:filenameID:0090220201
istex:09F86B69D271039C0B37582C76E2C96261234EB4
original-pdf:0090220201.pdf
ark:/67375/4W2-G2SR0XJH-9
href:eb018545.pdf
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0307-4358
1758-7743
DOI:10.1108/eb018545