NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Stakeholder, Transparency and Capital Structure

Andres Almazan, Javier Suarez, Sheridan Titman

NBER Working Paper No. 10101
Issued in November 2003
NBER Program(s):   CF

Firms that are more highly levered are forced to raise capital more often, a process that generates information about them. Of course transparency can improve the allocation of capital. However, when the information about the firm affects the terms under which the firm transacts with its customers and employees, transparency can have an offsetting negative effect. Under relatively general conditions, good news improves these terms of trade less than bad news worsens them, implying that increased transparency can lower firm value. In addition, we show that transparency can reduce the incentives of firms and stakeholders to undertake relationship specific investments. The negative effects of transparency can lead firms to pass up positive NPV investments that require external funding and to choose more conservative capital structures that they would otherwise choose. These effects should be especially important for technology firms that require a reputation for being on the leading edge.'

download in pdf format
   (456 K)

email paper

This paper is available as PDF (456 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10101

Users who downloaded this paper also downloaded these:
Almazan, Suarez, and Titman w13647 Firms' Stakeholders and the Costs of Transparency
Rauh and Sufi w14488 Capital Structure and Debt Structure
Almazan, de Motta, Titman, and Uysal w13660 Financial Structure, Liquidity, and Firm Locations
Fan, Titman, and Twite w16445 An International Comparison of Capital Structure and Debt Maturity Choices
Welch w8782 Columbus' Egg: The Real Determinant of Capital Structure
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us