Abstract:Based on the limited attention theory, this paper surveys the relation between advertising, information asymmetry and cost of debt. The result shows that advertising can attract investors’ attention, thus lowering the financing cost of debt through mitigating the problem of information asymmetry. This result indicates that advertising can mitigate the ignorance paradox, thus decreasing the financing cost of debt. Moreover, for non-stated owned firms and those with poor performance, the advertising can lower the financing cost of debt to a larger extent. Finally, advertising effect may be stronger for firms located in regions with better legal system or social credibility.