The Adverse Effect of Information on Governance and Leverage

Morrison, Alan, Laux, Christian and Loranth, Gyöngyi (2018) The Adverse Effect of Information on Governance and Leverage. Management Science, 64 (4). pp. 1510-1527.

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Abstract

We study the effect that internal information systems have upon a firm’s leverage and corporate governance choices. Information systems lower governance costs by facilitating more targeted interventions. But they also generate asymmetric information between firms and their investors. As a result, firms may attempt to signal their superior quality by assuming more leverage. In some circumstances, this can reduce governance incentives and result in inferior outcomes. Investors anticipate this effect, and it renders information systems inefficient.

Item Type: Article
Keywords: finance
Subject(s): Finance
Date Deposited: 17 Aug 2016 10:20
Date of author-version deposit: 17 August 2016
Last Modified: 03 Oct 2018 10:48
Funders: not applicable
URI: http://eureka.sbs.ox.ac.uk/id/eprint/6197

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