The Effect of Petrochemical Industry on Relationship between Information Asymmetry of Investment Risk and Financing Choices

Although it is generally accepted that information asymmetry has an impacton capital structure policy, the nature of the information asymmetry is notwell understood. Recent theoretical works and empirical evidences suggestthat financing choice depends upon the information asymmetry of theinvestment risk of using funds (Halov & Heider, 2012) (Rao, Mohanty, &Baxamusa, 2015). Consistent with this view, we analyzed the data gatheredamong 199 companies listed in Tehran Stock Exchange during 2009-2016 bythe multiple linear regressions in order to check that the research hypotheseshave been applied. We examined the influence of petrochemical industry onthat relationship. The findings show that equity is used to fund projects witha greater information asymmetry of their risk such as intangible assets, whiledebt is used to fund investments with a lower information asymmetry of theirrisk such as capital expenditure and liquidity enhancement. We found out thatthe membership of petrochemical industry has no effect on the intangibleassets, but, concerning the capital expenditure and working capital, the impactis significantly negative; the impact is significantly positive about cash holding.