This dissertation investigates the relationship between asymmetric information and debt. The first chapter focuses on lenders. Do information asymmetries inevitably lead to the high leverage and liquidity risk that have contributed to the instability of the U.S. banking system, or has this been in response to regulation and deposit insurance?; The chapter examines finance companies to see the capital and liability structure chosen by lenders operating outside of the bank regulatory system. The findings suggest that many of the features of the current U.S. banking sector arise as a result of regulation, not special incentives facing commercial lenders.; The second chapter analyzes debt maturity choice. Finance company issuance of commercial paper (CP) and bank reliance on demand debt expose them to liquidity risk, which they bear in order to borrow from a cash-management clientele. CP issuers can lower their overall borrowing costs by creating a risk-free claim for this clientele.; The key results of the model are that firms with the least uncertainty about future asset values are CP issuers, and access to the CP market is driven by public, not private, information. A firm's ability to create a risk-free security is the critical factor in access to the CP market. Firms with greater uncertainty about asset value do not have access to the CP market. This contrasts with recent papers where short-term debt serves either as a signal of private information about firm quality or as an incentive device needed because of asymmetric information about asset value.; The final chapter focuses on the firm's choice of intermediated versus directly-placed debt. Information asymmetries give rise to agency problems, and these problems may have a stronger inhibiting effect on directly placed debt. Intermediaries monitor the firm, overcoming the information asymmetry and reducing agency problems.; The chapter gathers detailed data on debt structure for a sample of 506 firms to test the hypothesis that bond debt is more sensitive to agency problems than are bank loans. Empirical results support this conclusion, as well as finding other evidence of the agency costs of debt.
展开▼
