Modeling Risk of Financial Signaling and Information Asymmetries in Debt Vs. Equity

Main Article Content

Rana Shahid Imdad
Majid Imdad Khan
Bazla Islam

Abstract

The study explores the risk towards decisions of Debt Vs. Equity, persistency over time, financial signaling, and asymmetric information behavior on capital structure, covering the period from 2012 to 2022. Agency issue prevails due to lack of information because managers have excessive information of a particular firm. Negative financial signaling, and information asymmetries have causal affect towards investor’s behavior about risk level. Extreme Bound Analysis (EBA), Z-score, and Beta are used to analyze results. The contradiction in theory, and empirics in emerging, and transitional economies were captured. There found financial signaling, and information asymmetric risk on capital structure (CS) of non-financial firms recorded in Pakistan Stock Exchange (PSE). The firm’s preferring debt issuance based on degree of equity with lower information. This research is a valuable flight for researchers, analysts, and investors regarding decision making. The implications of the study are management of financial signaling and asymmetries of information, still holds in emerging and transitional economies.

Article Details

How to Cite
Imdad, R. S., Majid Imdad Khan, & Bazla Islam. (2024). Modeling Risk of Financial Signaling and Information Asymmetries in Debt Vs. Equity. Pakistan Journal of Multidisciplinary Research, 5(2), 62-82. Retrieved from http://pjmr.org/pjmr/article/view/475
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