"This research is mainly to study the impact of corporate information transparency on corporate
financing decision. The “information disclosure and transparency ranking” survey results by the
Securities and Futures Institute (SFI) were incorporated into the regression models to test the pecking
order theory. The assumption was that information disclosure would lead to higher transparency, and in
turn, higher market efficiency. While the financial deficit gets higher, the debt gets higher too, but does
not follow the pecking order theory (management prefer debt financing to equity financing). On the other
hand, when taking transparency into consideration, empirical results showed that with lower
transparency and higher financial deficit, management is more inclined to follow the pecking order
theory. It is apparent that information transparency is a vital indicator for corporations to follow the
pecking order theory. Companies with lower transparency might raise debts extensively, and that would
further impact on stockholders’ equity inducing a more serious agency problem. Thus, government as
well as the corporate world should both promote information transparency and reduce information
asymmetry to protect stockholders from suffering adverse selection."
