Dynamic financial decisions with varying degrees of information asymmetry and profitability

Chen Hsun Lee, Frank Y.-H. Ying, Koyin Chang

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Much research has been conducted on the accuracy of the pecking order theory and the trade-off theory. Neither theory on its own has seemed to hold sufficient explanatory power to accurately describe capital structures. Chou et al. [Sun Yat-Sen Management Review, 19, 225-227 (2011)] proposed the signal factor hypothesis (SFH) which encompasses and integrates the two theories. Using hierarchical linear modeling (HLM), we verified the predictions of the SFH, proving that companies from Taiwan and China with low information symmetry have higher debt ratios than those with high information symmetry, and that profitability has a negative influence on capital structure regardless of the degree of the information asymmetry.

Original languageEnglish
Article number1650003
JournalReview of Pacific Basin Financial Markets and Policies
Volume19
Issue number1
DOIs
Publication statusPublished - 2016 Mar 1

Fingerprint

Factors
Symmetry
Profitability
Capital structure
Asymmetry of information
Financial decisions
Trade-off theory
Debt ratio
China
Prediction
Taiwan
Pecking order theory
Hierarchical linear modeling
Information asymmetry

Keywords

  • Capital structure
  • HLM
  • pecking order theory
  • signal factor hypothesis
  • trade-off theory

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Dynamic financial decisions with varying degrees of information asymmetry and profitability. / Lee, Chen Hsun; Ying, Frank Y.-H.; Chang, Koyin.

In: Review of Pacific Basin Financial Markets and Policies, Vol. 19, No. 1, 1650003, 01.03.2016.

Research output: Contribution to journalArticle

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