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RELATIONSHIP BETWEEN INDUSTRY AND CAPITAL STRUCTURE FROM AN ASYMMETRIC INFORMATION PERSPECTIVE

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Abstract:

The study is examining whether there is a significant relationship between the capital structure and the industry where the company is active at. If there would be a significant relationship between the industry and the capital structure, and moreover there would be an optimal capital structure - where the firm's value is maximal in every industry than it would be a guideline for the management and for those who are financing the operation of the company knowing the company's capital structure. Several theories and models have been carried out on the field of capital structure in the last decades. These theories searched the existence of an optimal capital structure and its effect on the firm's value. One of these theories is the asymmetric information theory.

This research examines the relationship between industry and capital structure from this asymmetric information perspective. The study provides clear evidence that there are industries which can be differentiated from other industries from capital structure viewpoint, moreover the study provides the role of information asymmetry of this phenomenon. The conclusion of the study is that it is important to take into account during a financing decision process that in which industry does the company operates.

Keywords: capital structure; concentration; cross table analysis; industry; leverage

Document Type: Research Article

DOI: http://dx.doi.org/10.5848/APBJ.2012.00022

Publication date: January 1, 2012

More about this publication?
  • The International Journal of Management Cases (IJMC) developed in 2002 from its predecessor The Journal of Management Cases, and present case studies across a broad range of management disciplines. The IJMC is the official journal of the CIRCLE Research Centre. CIRCLE (Centre for International Research Consumers, Locations and their Environments) is a virtual research group spreading over 70 universities.
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