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Growth Opportunities Utilization: Debt Overhang or Asymmetric Information?

Author

Listed:
  • Martono S.

    (Universitas Negeri Semarang, Faculty of Economics, Department of Management, INDONESIA)

  • Yulianto Arief

    (Universitas Negeri Semarang, Faculty of Economics, Department of Management, INDONESIA)

  • Wijaya Angga Pandu

    (Universitas Negeri Semarang, Faculty of Economics, Department of Management, INDONESIA)

Abstract

Inter-industry has various capital structures to take advantage of growth opportunities due to agency differences and information asymmetric problems. This research aims to analyze: (1) the differences in leverage between industries and (2) the impact of shareholders–debtholders conflict and information asymmetric on growth opportunities. The firm-level data used is extracted from Indonesia Stock Exchange's annual reports from 2008 to 2019. Authors used the analysis of variance (ANOVA). The findings show differences in leverage between industries. However, they are relatively stable and not excessive for assets to prevent conflicts between managers and shareholders with debtholders. Equity is also not used to utilize growth to reduce the discretionary power (dilution) of shareholders. As a result, the use of opportunities and growth is limited. This study identifies agency problems and asymmetric information that determines independent companies' decisions in exploiting growth opportunities.

Suggested Citation

  • Martono S. & Yulianto Arief & Wijaya Angga Pandu, 2021. "Growth Opportunities Utilization: Debt Overhang or Asymmetric Information?," Foundations of Management, Sciendo, vol. 13(1), pages 171-182, January.
    • Handle: RePEc:vrs:founma:v:13:y:2021:i:1:p:171-182:n:9
    DOI: 10.2478/fman-2021-0013
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    References listed on IDEAS

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    More about this item

    Keywords

    independent company; agency problem; information asymmetric;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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