Debt, Information Asymmetry and Bankers on Board
FEUNL Working Paper Series No. 597
29 Pages Posted: 24 Oct 2015
Date Written: 2015
We provide evidence that the presence of bankers in the board of directors reduce information asymmetry between credit markets and firms. We show that the impact of the presence of bankers on leverage is driven by firms with low level of debt. This effect is amplified the more connected the bankers are to the corporate world. Additionally the results are more pronounced for less transparent firms. Our findings suggest that the connectedness of bankers play a key role in reducing information asymmetry.
Keywords: information asymmetry, debt level, social networks, corporate boards, bankers
JEL Classification: G32, G21, D82, L14
Suggested Citation: Suggested Citation