Information Asymmetry and Corporate Liquidity Management: Evidence from Real Estate Investment Trusts

Information Asymmetry and Corporate Liquidity Management: Evidence from Real Estate Investment... We examine the impact of information asymmetry on a firm’s choice between cash and credit lines for corporate liquidity management using a panel data set from real estate investment trusts (REITs). Information asymmetry, as measured by analyst forecast error and dispersion, is negatively related to the use of lines of credit. Specifically, firms with more severe information asymmetry are less likely to have access to bank credit lines. Concurrently, more transparent firms are more likely to utilize bank credit lines as opposed to cash for liquidity management. The results are robust to alternative information asymmetry proxies and specifications. These findings suggest that information asymmetry plays an important role in corporate liquidity management. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Information Asymmetry and Corporate Liquidity Management: Evidence from Real Estate Investment Trusts

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Publisher
Springer US
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-010-9284-x
Publisher site
See Article on Publisher Site

Abstract

We examine the impact of information asymmetry on a firm’s choice between cash and credit lines for corporate liquidity management using a panel data set from real estate investment trusts (REITs). Information asymmetry, as measured by analyst forecast error and dispersion, is negatively related to the use of lines of credit. Specifically, firms with more severe information asymmetry are less likely to have access to bank credit lines. Concurrently, more transparent firms are more likely to utilize bank credit lines as opposed to cash for liquidity management. The results are robust to alternative information asymmetry proxies and specifications. These findings suggest that information asymmetry plays an important role in corporate liquidity management.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Oct 15, 2010

References

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