Keywords
information asymmetry; capital structure; market value of the company; WACC
Abstract
The paper investigates the impact of capital structure and information asymmetry on the value of companies listed on the Warsaw Stock Exchange. The study was conducted using the ordinary least squares (OLS) method on a sample of 273 companies in 2017 and the GMM dynamic panel- data approach with instrumental variables. Data retrieved from the Notoria, Bloomberg and Orbis databases were used. The results show that despite its impact on reducing the cost of capital, increasing debt does not lead to an increase in equity value. Therefore, the benefits of higher short-term leverage are limited and visible only for long-term debt. On the other hand, despite bigger information asymmetry, companies are valued higher, which means that asymmetrical information does not necessarily hurt valuation in the short term but in the long term. The results contribute to the literature on firms’ use of leverage under information asymmetry, showing higher trust in cash flow than profi ts in books.
Recommended Citation
Gralewska, M., & Białek-Jaworska, A. (2024). Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE. Journal of Banking and Financial Economics, 2022(17), 17-41. https://doi.org/10.7172/2353-6845.jbfe.2022.1.2
First Page
17
Last Page
41
Page Count
25
Received Date
23 February 2022
Revised Date
16 July 2022
Accept Date
1 August 2022
Online Available Date
26 August 2022
DOI
10.7172/2353-6845.jbfe.2022.1.2
JEL Code
A1; B2; C5; G1; G2; G3
Publisher
University of Warsaw