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

Posted: 19 Nov 2012

See all articles by Heng An

Heng An

University of North Carolina (UNC) at Greensboro - Department of Accounting and Finance

William G. Hardin

Florida International University (FIU) - College of Business Administration

Zhonghua Wu

Florida International University (FIU)

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Date Written: November 19, 2012

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.

Keywords: Information asymmetry, Liquidity management, REITs

JEL Classification: G21, G32

Suggested Citation

An, Heng and Hardin, William G. and Wu, Zhonghua, Information Asymmetry and Corporate Liquidity Management: Evidence from Real Estate Investment Trusts (November 19, 2012). Journal of Real Estate Finance and Economics, Vol. 45, No. 3, 2012, Available at SSRN: https://ssrn.com/abstract=2178096

Heng An (Contact Author)

University of North Carolina (UNC) at Greensboro - Department of Accounting and Finance ( email )

Bryan School of Business and Economics
Greensboro, NC 27412
United States

William G. Hardin

Florida International University (FIU) - College of Business Administration ( email )

Miami, FL 33199
United States

Zhonghua Wu

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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