IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v42y1987i5p1225-43.html
   My bibliography  Save this article

Efficient Financing under Asymmetric Information

Author

Listed:
  • Brennan, Michael J
  • Kraus, Alan

Abstract

This paper characterizes the conditions under which the adverse-selection problem, which may prevent a firm from issuing securities to finance an otherwise profitable investment, may be costlessly overcome by an appropriate choice of financing strategy. The conditions are specialized when the information asymmetry may be characterized by either a first-degree stochastic dominance or a mean-preserving spread ordering across possible distributions of firm earnings. Possible financing strategies which resolve the information asymmetry are discussed and the results are related to recent empirical findings concerning security issues. Copyright 1987 by American Finance Association.

Suggested Citation

  • Brennan, Michael J & Kraus, Alan, 1987. " Efficient Financing under Asymmetric Information," Journal of Finance, American Finance Association, vol. 42(5), pages 1225-1243, December.
  • Handle: RePEc:bla:jfinan:v:42:y:1987:i:5:p:1225-43
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-1082%28198712%2942%3A5%3C1225%3AEFUAI%3E2.0.CO%3B2-5&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:42:y:1987:i:5:p:1225-43. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/afaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.