I apologize if I’m nitpicking but I can’t grasp the following concept from CorpFin.
This is what the curriculum says:
A high level of information asymmetry between managers and investors encourages managers to use more debt in the capital structure
Later there are examples contradicting that statement
Companies in the utility industry have a low degree of information asymmetry. As a result, utility companies tend to have much more debt than companies in other industries.
In contrast, companies in the technology or pharmaceutical industries tend to have little or no debt: there’s a high degree of information asymmetry (they are very secretive about their products)
However all the EOC hold the “low asymmetry --> less debt” rule. Does it mean I should just forget about those examples?
Thank you!