TY  - JOUR
AU  - Almazan,Andres
AU  - Suarez,Javier
AU  - Titman,Sheridan
TI  - Stakeholder, Transparency and Capital Structure
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10101
PY  - 2003
Y2  - November 2003
UR  - http://www.nber.org/papers/w10101
L1  - http://www.nber.org/papers/w10101.pdf
N1  - Author contact info:
Andres Almazan
Finance Department
McCombs School of Business
University of Texas at Austin
Austin, TX 78712-1179
E-Mail: andres.almazan@mccombs.utexas.edu

Javier Suarez
CEMFI
Casado del Alisal 5
28014 Madrid, SPAIN
E-Mail: suarez@cemfi.es

Sheridan Titman
Finance Department
McCombs School of Business
University of Texas at Austin
Austin, TX 78712-1179
Tel: 512/232-2787
Fax: 512/471-5073
E-Mail: titman@mail.utexas.edu
AB  - 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.'
ER  -