The information asymmetry and valuation effects on health care technology

Author: Brent, William H.

Source: International Journal of Technology Management, Volume 15, Numbers 3-4, August 1998 , pp. 270-298(29)

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Abstract:

The asymmetry in information between the managers of a health care firm and the rest of the market is of particular importance in corporate finance. This paper studies the effect that information asymmetry has on the financial behaviour of for-profit hospitals during the processes of capital structure formation and accumulation of the wealth needed to advance their health technology. The results indicate that information asymmetry matters in the formulation of a health firm's external and internal capital formation and thereby the extent of its ability to acquire technology. Risk of the market and abnormal cashflow returns are key measures of information asymmetry. As expected, the level of information asymmetry increases the drop observed in the stock price of the firm at or near the announcement date.

Keywords: MANAGEMENT AND BUSINESS; Policy and Organisational Management; Technology Management

Document Type: Research article

DOI: http://dx.doi.org/10.1504/IJTM.1998.002606

Affiliations: 1: Department of Finance & Insurance, Howard University, School of Business, Washington, DC 20059, USA

Publication date: 1998-08-01

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