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! ]

Adverse Selection and Risk Aversion in Capital Markets

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Braido, Luis () (Fundacao Getulio Vargas)
da Costa, Carlos () (Fundacao Getulio Vargas)
Dahlby, Bev () (University of Alberta, Department of Economics)

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

Abstract

We generalize the Boadway and Keen (2006) model of adverse selection in a capital market to allow for risk aversion on the part of entrepreneurs. We show that the Boadway and Keen conclusion-that adverse selection leads to excessive investment-does not necessarily hold when entrepreneurs are risk averse. We use their framework, with the additional assumption of risk aversion, to analyze the effect of policies that would reduce entrepreneurs' reliance on debt or equity financing by outside investors. We show that such policies, by exposing entrepreneurs to more down-side risk, may reduce the level of investment in risky projects, increase inequality and potentially reduce social welfare.

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 page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.uofaweb.ualberta.ca/economics2/pdfs/WP2009-15-Dahlby.pdf
File Format: application/pdf
File Function: Full text
Download Restriction: no

Publisher Info
Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2009-15.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 31 pages
Date of creation: 16 Mar 2009
Date of revision: 24 Mar 2009
Handle: RePEc:ris:albaec:2009_015

Contact details of provider:
Postal: 8-14 HM Tory, Edmonton, Alberta, T6G 2H4
Phone: (780) 492-3406
Fax: (780) 492-3300
Web page: http://www.uofaweb.ualberta.ca/economics/
More information through EDIRC

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

Related research
Keywords: adverse selection; capital markets; inefficiency; risk and entrepreneurship;

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

This paper has been announced in the following NEP Reports:

Statistics
Access and download statistics

Did you know? About five million pdf files are downloaded through RePEc every year.

This page was last updated on 2009-11-26.


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.