INFORMATION DISCLOSURE COSTS AND THE CHOICE OF FINANCING SOURCE

Small- and medium-size, high-quality, entrepreneurial firms may prefer bilateral to multilateral financing arrangements, in order to avoid d isclosure of private information which might leak to competitors. In t he presence of a cost differential between these forms of financing, t he higher quality firms (those with more to lose from disclosure) pref er bilateral financing. The cost differential prevents competitors fro m unambiguously inferring that these firms are hiding information. (C) 1995 Academic Press, Inc.