Using a novel information asymmetry index based on measures of adverse selection developed by the market microstructure literature, we test whether information asymmetry is an important determinant of capital structure decisions, as suggested by the pecking order theory. Our index relies...

Sophisticated financial market participants frequently choose to disclose private information to the public—a phenomenon inconsistent with most theories of speculative trading. In this paper, we propose and test a model to bridge this gap. We show that when a speculator cares about both the...