Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE
Information Asymmetry, Capital Structure and Equity Value of Firms Listed on the WSE

Summary/Abstract: The paper investigates the impact of capital structure and information asymmetry on the value ofcompanies listed on the Warsaw Stock Exchange. The study was conducted using the ordinaryleast squares (OLS) method on a sample of 273 companies in 2017 and the GMM dynamic paneldataapproach with instrumental variables. Data retrieved from the Notoria, Bloomberg and Orbisdatabases were used. The results show that despite its impact on reducing the cost of capital,increasing debt does not lead to an increase in equity value. Therefore, the benefits of highershort-term leverage are limited and visible only for long-term debt. On the other hand, despitebigger information asymmetry, companies are valued higher, which means that asymmetricalinformation does not necessarily hurt valuation in the short term but in the long term. The resultscontribute to the literature on firms’ use of leverage under information asymmetry, showinghigher trust in cash flow than profits in books.

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