Quotation Maksimovic, Vojislav, Stomper, Alexander, Zechner, Josef. 1999. Capital Structure, Information Acquisition and Investment Decisions in Industry Equilibrium. European Finance Review 2 S. 251-271.


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Abstract

This paper analyzes the relationship between a firm''s capital structure and its information acquisition prior to capital budgeting decisions. It is found that low-growth industries can sustain a large number of levered firms. In these industries, leverage is negatively related to a firm''s incentive to acquire information during the capital budgeting process. In contrast, high-growth industries only sustain a small number of levered firms. In these industries, levered firms acquire more information than all-equity financed firms. The model yields empirical predictions regarding the effects of leverage on the expected amount and the volatility of corporate investment. While leverage does not affect firm value, highly levered firms generate a more volatile cash flow than firms with low debt levels.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal European Finance Review
Language English
Title Capital Structure, Information Acquisition and Investment Decisions in Industry Equilibrium
Volume 2
Year 1999
Page from 251
Page to 271
Reviewed? Y
URL http://www.springerlink.com/content/t411n06q4lh16852/
DOI http://dx.doi.org/10.1023/A:1009825432146

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People
Zechner, Josef (Details)
External
Maksimovic, Vojislav (University of Maryland, United States/USA)
Stomper, Alexander (Universit├Ąt Wien, Austria)
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