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Debt, information asymmetry and bankers on board

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  • Joao Amaro de Matos
  • Joao Mergulhao

Abstract

We provide evidence that the presence of bankers in the board of directors reduce information asymmetry between credit markets and fi rms. We show that the impact of the presence of bankers on leverage is driven by firms with low level of debt. This eff ect is amplifi ed the more connected the bankers are to the corporate world. Additionally the results are more pronounced for less transparent firms. Our findings suggest that the connectedness of bankers play a key role in reducing information asymmetry.

Suggested Citation

  • Joao Amaro de Matos & Joao Mergulhao, 2015. "Debt, information asymmetry and bankers on board," Nova SBE Working Paper Series wp597, Universidade Nova de Lisboa, Nova School of Business and Economics.
    • Handle: RePEc:unl:unlfep:wp597
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    References listed on IDEAS

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    More about this item

    Keywords

    information asymmetry; debt level; social networks; corporate boards; bankers;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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