Information Asymmetry and the Pricing of Privately Placed Debt

26 Pages Posted: 2 Feb 2021 Last revised: 10 Mar 2021

See all articles by Kilian Dinkelaker

Kilian Dinkelaker

University of St. Gallen

Andreas Walter Mattig

University of St. Gallen

Stefan Morkoetter

University of St. Gallen - School of Finance; University of St.Gallen / St.Gallen Institute of Management in Asia

Date Written: January 19, 2021

Abstract


Based on a dataset including 11,636 private debt placements issued globally between 1999 and 2016, we investigate the association between borrower-lender information asymmetry and the cost of debt for issuers. We observe that information asymmetry due to being a private or unrated firm is associated with higher cost of private debt. Our results equally inform corporate financing decisions and government initiatives aimed at promoting private debt markets in order to expand funding sources for the private sector.

Keywords: Private placement, cost of debt, information asymmetry, corporate structure

JEL Classification: G30, G32, G38

Suggested Citation

Dinkelaker, Kilian and Mattig, Andreas Walter and Morkoetter, Stefan, Information Asymmetry and the Pricing of Privately Placed Debt (January 19, 2021). University of St.Gallen, School of Finance Research Paper No. 2021/03, Available at SSRN: https://ssrn.com/abstract=3777161 or http://dx.doi.org/10.2139/ssrn.3777161

Kilian Dinkelaker

University of St. Gallen ( email )

Switzerland

HOME PAGE: http://www.unisg.ch

Andreas Walter Mattig

University of St. Gallen ( email )

Rosenbergstrasse 52
CH-9000 St. Gallen, 9000
Switzerland

Stefan Morkoetter (Contact Author)

University of St. Gallen - School of Finance ( email )

111 Amoy Street
Singapore, 069931
Singapore

University of St.Gallen / St.Gallen Institute of Management in Asia ( email )

111 Amoy Street
Singapore, 069931
Singapore

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