Diamond (2019) define cash flow pledgeability as the fraction of realized cash flows that are automatically directed to an outside financier. More than that, we can say that pledgeability changes according to the payment risk to which the firm is exposed. For example, when the safe cash flow component is large relative to total cash flow, pledgeability is maximized by offering a safe repayment in every period; essentially safe short-term debt. On the other hand, the risky part of the cash flow makes up a significant fraction of the firm's overall cash flow, pledgeability is maximized by alternating between safe and risky repayments.

Increasing pledgeability means closing off tunnels for cash flows generated by a future decision maker. For example, Rajan (2012) affirms that by moving to a simpler corporate structure today, or by making contracts with more transparent suppliers with stricter rules, the incumbent ensures that future cash flows cannot be diverted to some nontransparent entity. By improving the high quality of accounting systems, independent audit firm, the incumbent restricts the scope for future managers to play accounting games to hide cash flows. Any shift from transparent accounting procedures to less transparent procedures, or from a reputable auditor to a less reputable auditor, would be noticed and invite closer scrutiny, impacting the pledgeability level.

To these mechanisms that affect the degree of pledgeability, we call asymmetric information. For example, Berger (2005) verified the effects of risk and information asymmetry in relation to the company's debt maturity. Through maturity data, risk assessments and other contractual conditions, the authors prove that a reduction in information asymmetry is associated with increases in maturity for low risk companies and also suggest that asymmetric information has a strong quantitative role in determining maturity debt.

Given the amount of research involving asymmetric information, some conclusions are important to understand how pledgeability is affected, fluctuates and can compromise other decisions of the firms. By this way, what factors impact the pledgeability of Brazilian companies?