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Over‐The‐Counter Firms, Asymmetric Information, And Financing Preferences

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  • Linda C. Hittle
  • Kamal Haddad
  • Lawrence J. Gitman

Abstract

A puzzling empirical finding is that firms often seem to follow a pecking‐order hierarchy of financing. Asymmetric information has been hypothesized as one possible explanation for the pecking‐order hierarchy. A survey of Fortune 500 firms found strong support for the pecking‐order model. This study surveys over‐the‐counter firms which seem more likely to experience asymmetric information than the Fortune 500. The findings of this study provide empirical support for the asymmetric information hypothesis by demonstrating that managers of firms with greater asymmetric information are more likely to believe their stock is mispriced leading them to follow the pecking‐order model of financing.

Suggested Citation

  • Linda C. Hittle & Kamal Haddad & Lawrence J. Gitman, 1992. "Over‐The‐Counter Firms, Asymmetric Information, And Financing Preferences," Review of Financial Economics, John Wiley & Sons, vol. 2(1), pages 81-92, September.
    • Handle: RePEc:wly:revfec:v:2:y:1992:i:1:p:81-92
    DOI: 10.1002/j.1873-5924.1992.tb00559.x
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    References listed on IDEAS

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