The asymmetry in information between the managers of a health care firm and the rest of the market is of particular importance in corporate finance. This paper studies the effect that information asymmetry has on the financial behaviour of for-profit hospitals during the processes of capital structure formation and accumulation of the wealth needed to advance their health technology. The results indicate that information asymmetry matters in the formulation of a health firm's external and internal capital formation and thereby the extent of its ability to acquire technology. Risk of the market and abnormal cashflow returns are key measures of information asymmetry. As expected, the level of information asymmetry increases the drop observed in the stock price of the firm at or near the announcement date.
Keywords: asymmetric information, capital technology, health care firms
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