Asymmetric information and credit quality: Evidence from synthetic fixed-rate financing
✍ Scribed by Betty J. Simkins; Daniel A. Rogers
- Book ID
- 102219573
- Publisher
- John Wiley and Sons
- Year
- 2006
- Tongue
- English
- Weight
- 184 KB
- Volume
- 26
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
In this article the usage of synthetic fixed-rate financing (SFRF) with interest rate swaps (i.e., borrowing short-term and using swaps to hedge interest rate risk, instead of selecting conventional fixed-rate financing) by Fortune 500 and S&P 500 nonfinancial firms is examined over the period 1991 through 1995. Credit ratings, debt issuance, and debt maturities of these firms are monitored through 1999. Strong evidence is found supporting the asymmetric information theory of swap usage as described by S. Titman (1992), even after controlling for industry, credit quality, size Earlier drafts of this research circulated as "Asymmetric Information, Credit Quality and Synthetic Fixed-Rate Financing Using Interest Rate Swaps" by Betty J. Simkins. We are grateful for comments from the editor (Bob Webb), an anonymous referee,