Does the relation between information quality and capital structure vary with cross-country institutional differences?

Prior research based on U.S. data finds that firms with better information quality raise more equity whereas firms with poorer information quality prefer to issue debt when they seek external financing. Little is known about whether the same conclusion holds outside the U.S. and how the country-leve...

Full description

Saved in:
Bibliographic Details
Main Authors: CHEN, Jeff Zeyun, Chee Yeow LIM, LOBO, Gerald J.
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2016
Subjects:
Online Access:https://ink.library.smu.edu.sg/soa_research/1563
https://ink.library.smu.edu.sg/context/soa_research/article/2590/viewcontent/RelationBetweenInformationQualityCapitalStructure_2016_jiar_afv.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
id sg-smu-ink.soa_research-2590
record_format dspace
spelling sg-smu-ink.soa_research-25902017-09-19T05:12:48Z Does the relation between information quality and capital structure vary with cross-country institutional differences? CHEN, Jeff Zeyun Chee Yeow LIM, LOBO, Gerald J. Prior research based on U.S. data finds that firms with better information quality raise more equity whereas firms with poorer information quality prefer to issue debt when they seek external financing. Little is known about whether the same conclusion holds outside the U.S. and how the country-level institutional environment influences the relation between information quality and capital structure choices. We examine the relation between accounting information quality (measured by earnings precision, accruals quality, and analyst consensus) and financial leverage across 24 countries and whether that relation varies systematically with country-level investor protection and financial orientation. We document a lower financial leverage for firms with better information quality. More importantly, we find a stronger relation between information quality and financial leverage in countries with weaker investor protection and more market-oriented economies. These cross-country results suggest that information quality is especially important in shaping a firm's capital structure decision when investor demand for information is greater. 2016-09-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1563 info:doi/10.2308/jiar-51606 https://ink.library.smu.edu.sg/context/soa_research/article/2590/viewcontent/RelationBetweenInformationQualityCapitalStructure_2016_jiar_afv.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University capital structure financial leverage information quality investor protection bank-oriented economy market-oriented economy Accounting Corporate Finance
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic capital structure
financial leverage
information quality
investor protection
bank-oriented economy
market-oriented economy
Accounting
Corporate Finance
spellingShingle capital structure
financial leverage
information quality
investor protection
bank-oriented economy
market-oriented economy
Accounting
Corporate Finance
CHEN, Jeff Zeyun
Chee Yeow LIM,
LOBO, Gerald J.
Does the relation between information quality and capital structure vary with cross-country institutional differences?
description Prior research based on U.S. data finds that firms with better information quality raise more equity whereas firms with poorer information quality prefer to issue debt when they seek external financing. Little is known about whether the same conclusion holds outside the U.S. and how the country-level institutional environment influences the relation between information quality and capital structure choices. We examine the relation between accounting information quality (measured by earnings precision, accruals quality, and analyst consensus) and financial leverage across 24 countries and whether that relation varies systematically with country-level investor protection and financial orientation. We document a lower financial leverage for firms with better information quality. More importantly, we find a stronger relation between information quality and financial leverage in countries with weaker investor protection and more market-oriented economies. These cross-country results suggest that information quality is especially important in shaping a firm's capital structure decision when investor demand for information is greater.
format text
author CHEN, Jeff Zeyun
Chee Yeow LIM,
LOBO, Gerald J.
author_facet CHEN, Jeff Zeyun
Chee Yeow LIM,
LOBO, Gerald J.
author_sort CHEN, Jeff Zeyun
title Does the relation between information quality and capital structure vary with cross-country institutional differences?
title_short Does the relation between information quality and capital structure vary with cross-country institutional differences?
title_full Does the relation between information quality and capital structure vary with cross-country institutional differences?
title_fullStr Does the relation between information quality and capital structure vary with cross-country institutional differences?
title_full_unstemmed Does the relation between information quality and capital structure vary with cross-country institutional differences?
title_sort does the relation between information quality and capital structure vary with cross-country institutional differences?
publisher Institutional Knowledge at Singapore Management University
publishDate 2016
url https://ink.library.smu.edu.sg/soa_research/1563
https://ink.library.smu.edu.sg/context/soa_research/article/2590/viewcontent/RelationBetweenInformationQualityCapitalStructure_2016_jiar_afv.pdf
_version_ 1770573307424276480