Abstract

http://ssrn.com/abstract=2038896
 
 

References (30)



 
 

Citations (3)



 


 



Information Asymmetry, the Cost of Debt, and Credit Events


François Derrien


HEC Paris - Finance Department

Ambrus Kecskes


York University - Schulich School of Business

Sattar Mansi


Virginia Polytechnic Institute & State University

April 12, 2012


Abstract:     
We hypothesize that an increase in information asymmetry causes an increase in both expected and actual losses to debtholders. To test this, we identify exogenous increases in information asymmetry using the loss of an analyst that results from broker closures and broker mergers. We find that the loss of an analyst causes the cost of debt to increase by 25 basis points for treatment firms compared to control firms. Moreover, the rate of credit events (such as defaults) is roughly 100-150% higher than for similar firms that do not lose an analyst. These results are significantly stronger for firms that are smaller, have less analyst coverage, have higher leverage, have a lower credit rating, have shorter debt maturity, and have a bigger increase in information asymmetry.

Number of Pages in PDF File: 39

Keywords: Information asymmetry, Cost of debt, Default, Bankruptcy, Natural experiment, Matching estimators, Difference-in-differences, Equity research analysts

JEL Classification: D80, G12, G24, G33

working papers series


Download This Paper

Date posted: April 12, 2012  

Suggested Citation

Derrien, François and Kecskes, Ambrus and Mansi, Sattar, Information Asymmetry, the Cost of Debt, and Credit Events (April 12, 2012). Available at SSRN: http://ssrn.com/abstract=2038896 or http://dx.doi.org/10.2139/ssrn.2038896

Contact Information

François Derrien (Contact Author)
HEC Paris (Groupe HEC) - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
33 1 39 67 72 98 (Phone)
HOME PAGE: http://www.hec.fr/derrien

Ambrus Kecskes
York University - Schulich School of Business ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
Sattar Mansi
Virginia Polytechnic Institute & State University ( email )
Feedback to SSRN


Paper statistics
Abstract Views: 911
Downloads: 273
Download Rank: 60,704
References:  30
Citations:  3

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.484 seconds