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Investments and financial structure with imperfect financial markets: an intertemporal discrete-time framework

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  • Marco Mazzoli

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    Abstract

    This paper deals with the problem of simultaneity between the firm's investments and financial structure, in a context of dynamic optimization, characterised by two main assumptions: first of all, diverging incentives for managers and shareholders, secondly, financial markets imperfections generating a risk premium on the borrowed finance. A ''discrete-time'' framework has been introduced in order to better model the relevance of timing in the co-ordination process between financial and investment decisions, assumed to take place simultaneously. The simple model proposed here may provide some intuitive interpretation for a number of phenomena such as the propagation of financial shocks into the real economy and the countercyclical mark-ups.

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    File URL: http://www.economia.unimore.it/marotta_giuseppe/murst/mazzoli1.pdf
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    Bibliographic Info

    Paper provided by Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica in its series Heterogeneity and monetary policy with number 0008.

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    Length: pages 14
    Date of creation: Jul 2000
    Date of revision:
    Handle: RePEc:mod:modena:0008

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    Web page: http://www.economia.unimore.it
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    Related research

    Keywords: investments; financing policy.;

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    1. Michel Poitevin, 1989. "Collusion and the Banking Structure of a Duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 263-77, May.
    2. Kurz, Mordecai, 1994. "On Rational Belief Equilibria," Economic Theory, Springer, vol. 4(6), pages 859-76, October.
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