This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Debt-equity choice as a signal of profit profile over time

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Miglo, Anton

Additional information is available for the following registered author(s):

Abstract

This paper analyzes debt-equity choice for financing a two-stage investment when a firm’s insiders have private information about the firm’s expected earnings. When private information is one-dimensional (for example when short-term earnings are common knowledge while long-term earnings are private information) a separating equilibrium does not exist. When private information is two-dimensional a separating equilibrium may exist where firms with a higher rate of earnings growth issue debt and firms with a low rate of earnings growth issue equity. This provides new insights into the issue of different kinds of securities by different types of firms under asymmetric information as well as the link between debt-equity choice and operating performance.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/1283/
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1283.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:pra:mprapa:1283

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).

Related research
Keywords: Debt-equity choice Asymmetric information Timing of earnings Long-term underperformance

Find related papers by JEL classification:
G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Eckbo, B. Espen & Masulis, Ronald W. & Norli, Oyvind, 2000. "Seasoned public offerings: resolution of the 'new issues puzzle'," Journal of Financial Economics, Elsevier, vol. 56(2), pages 251-291, May. [Downloadable!] (restricted)
  2. Goswami, Gautam & Noe, Thomas H & Rebello, Michael J, 1995. " Debt Financing under Asymmetric Information," Journal of Finance, American Finance Association, vol. 50(2), pages 633-59, June. [Downloadable!] (restricted)
  3. Alexander W. Butler & Gustavo Grullon & James P. Weston, 2005. "Can Managers Forecast Aggregate Market Returns?," Journal of Finance, American Finance Association, vol. 60(2), pages 963-986, 04. [Downloadable!] (restricted)
  4. Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August. [Downloadable!] (restricted)
  5. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  6. Paul Schultz, 2003. "Pseudo Market Timing and the Long-Run Underperformance of IPOs," Journal of Finance, American Finance Association, vol. 58(2), pages 483-518, 04. [Downloadable!] (restricted)
  7. Nachman, David C & Noe, Thomas H, 1994. "Optimal Design of Securities under Asymmetric Information," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 7(1), pages 1-44. [Downloadable!] (restricted)
  8. Lucas, Deborah J & McDonald, Robert L, 1990. " Equity Issues and Stock Price Dynamics," Journal of Finance, American Finance Association, vol. 45(4), pages 1019-43, September. [Downloadable!] (restricted)
  9. Cai, Jun & Wei, K. C. John, 1997. "The investment and operating performance of Japanese initial public offerings," Pacific-Basin Finance Journal, Elsevier, vol. 5(4), pages 389-417, September. [Downloadable!] (restricted)
  10. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Brick, Ivan E & Frierman, Michael & Kim, Yu Kyung, 1998. "Asymmetric Information concerning the Variance of Cash Flows: The Capital Structure Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 745-61, August.
  12. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June. [Downloadable!] (restricted)
  13. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July. [Downloadable!] (restricted)
  14. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March. [Downloadable!] (restricted)
  15. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, 08. [Downloadable!] (restricted)
    Other versions:
  16. Mikkelson, Wayne H. & Partch, M. Megan & Shah, Kshitij, 1997. "Ownership and operating performance of companies that go public," Journal of Financial Economics, Elsevier, vol. 44(3), pages 281-307, June. [Downloadable!] (restricted)
  17. Malcolm Baker & Jeffrey Wurgler, 2002. "Market Timing and Capital Structure," Journal of Finance, American Finance Association, vol. 57(1), pages 1-32, 02. [Downloadable!] (restricted)
    Other versions:
  18. Giammarino, Ronald M, 1989. "The Resolution of Financial Distress," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 2(1), pages 25-47. [Downloadable!] (restricted)
  19. Flannery, Mark J, 1986. " Asymmetric Information and Risky Debt Maturity Choice," Journal of Finance, American Finance Association, vol. 41(1), pages 19-37, March. [Downloadable!] (restricted)
  20. Jain, Bharat A & Kini, Omesh, 1994. " The Post-Issue Operating Performance of IPO Firms," Journal of Finance, American Finance Association, vol. 49(5), pages 1699-1726, December. [Downloadable!] (restricted)
  21. Christopher A. Hennessy & Toni M. Whited, 2005. "Debt Dynamics," Journal of Finance, American Finance Association, vol. 60(3), pages 1129-1165, 06. [Downloadable!] (restricted)
    Other versions:
  22. Loughran, Tim & Ritter, Jay R, 1997. " The Operating Performance of Firms Conducting Seasoned Equity Offerings," Journal of Finance, American Finance Association, vol. 52(5), pages 1823-50, December. [Downloadable!] (restricted)
  23. Charles Calomiris & Joseph Mason, 2004. "Credit Card Securitization and Regulatory Arbitrage," Journal of Financial Services Research, Springer, vol. 26(1), pages 5-27, August. [Downloadable!] (restricted)
    Other versions:
  24. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  25. Brennan, Michael J & Kraus, Alan, 1987. " Efficient Financing under Asymmetric Information," Journal of Finance, American Finance Association, vol. 42(5), pages 1225-43, December. [Downloadable!] (restricted)
  26. Grinblatt, Mark & Hwang, Chuan Yang, 1989. " Signalling and the Pricing of New Issues," Journal of Finance, American Finance Association, vol. 44(2), pages 393-420, June. [Downloadable!] (restricted)
  27. Pagano, Marco & Panetta, Fabio & Zingales, Luigi, 1996. "Why Do Companies Go Public? An Empirical Analysis," CEPR Discussion Papers 1332, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  28. Amiyatosh K. Purnanandam, 2004. "Are IPOs Really Underpriced?," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 17(3), pages 811-848. [Downloadable!] (restricted)
  29. Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999. "Earnings Management to Exceed Thresholds," Journal of Business, University of Chicago Press, vol. 72(1), pages 1-33, January. [Downloadable!] (restricted)
    Other versions:
  30. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? RePEc stands for Research Papers in Economics.

This page was last updated on 2008-11-17.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.