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Multi-stage investment, long-term asymmetric information and equity issues

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  • Miglo, Anton

Abstract

We analyze equity financing for a two-stage investment and consider different informational structures. When private information is short-term, equilibria are consistent with signalling theory and pecking-order theory. When private information is long-term, equilibria may exist where high quality firms issue equity. The model explains the link between debt-equity choice and subsequent performance after issue (short-term versus long-term). A set of new predictions is generated regarding the link between the extent of asymmetric information and equity issues, macroeconomic performance and equity issues and market timing.

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File URL: http://mpra.ub.uni-muenchen.de/46692/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46692.

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Date of creation: 2012
Date of revision:
Publication status: Published in Journal of Current Issues in Finance, Business and Economics 4.4(2012): pp. 331-348
Handle: RePEc:pra:mprapa:46692

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Keywords: equity issues; long-term asymmetric information; multi-stage investment; pecking-order theory; signalling;

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Cited by:
  1. Miglo, Anton, 2010. "The Pecking Order, Trade-off, Signaling, and Market-Timing Theories of Capital Structure: a Review," MPRA Paper 46691, University Library of Munich, Germany, revised 2013.

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