Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE
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 paneldata approach with in...
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| Format: | Article |
| Language: | English |
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University of Warsaw
2022-08-01
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| Series: | Journal of Banking and Financial Economics |
| Subjects: | |
| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1016&context=jbfe |
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| _version_ | 1841562474913988608 |
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| author | Milena Gralewska Anna Białek-Jaworska |
| author_facet | Milena Gralewska Anna Białek-Jaworska |
| author_sort | Milena Gralewska |
| collection | DOAJ |
| description | 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 paneldata
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 profits in books. |
| format | Article |
| id | doaj-art-82eaaa51be014835bb45c4688099c2bd |
| institution | Kabale University |
| issn | 2353-6845 |
| language | English |
| publishDate | 2022-08-01 |
| publisher | University of Warsaw |
| record_format | Article |
| series | Journal of Banking and Financial Economics |
| spelling | doaj-art-82eaaa51be014835bb45c4688099c2bd2025-01-03T00:54:43ZengUniversity of WarsawJournal of Banking and Financial Economics2353-68452022-08-0120221(17)174110.7172/2353-6845.jbfe.2022.1.2Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSEMilena Gralewska0Anna Białek-Jaworska1https://orcid.org/0000-0003-4520-8916University of Warsaw, Faculty of Economic SciencesUniversity of Warsaw, Faculty of Economic SciencesThe 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 paneldata 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 profits in books.https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1016&context=jbfeinformation asymmetrycapital structuremarket value of the companywacc |
| spellingShingle | Milena Gralewska Anna Białek-Jaworska Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE Journal of Banking and Financial Economics information asymmetry capital structure market value of the company wacc |
| title | Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE |
| title_full | Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE |
| title_fullStr | Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE |
| title_full_unstemmed | Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE |
| title_short | Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE |
| title_sort | information asymmetry capital structure and equity value of firms listed on the wse |
| topic | information asymmetry capital structure market value of the company wacc |
| url | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1016&context=jbfe |
| work_keys_str_mv | AT milenagralewska informationasymmetrycapitalstructureandequityvalueoffirmslistedonthewse AT annabiałekjaworska informationasymmetrycapitalstructureandequityvalueoffirmslistedonthewse |