...Salma Mokdadi; Zied Saadaoui Purpose This paper aims to study the impact of geopolitical uncertainty on corporate cost of debt and the moderating role of information asymmetry between creditors and borrowing firms. Design/methodology/approach This study uses 5,223 firm-quarter observations...

... and uninformed lenders. The firm knows the risk of its assets, while lenders only know the minimum level of risk. The author solves for the signaling equilibrium and derive explicit formulas for the firm’s cost of debt and optimal leverage. Findings In contrast to the tradeoff theory of capital structure...