IDEAS home Printed from https://ideas.repec.org/a/ecj/econjl/v108y1998i451p1707-32.html
   My bibliography  Save this article

Financial Innovation and Delegation of Control

Author

Listed:
  • Instefjord, Norvald

Abstract

The literature on security design has traditionally assumed that control of investment and production rests with the entrepreneur even after flotation. In this article, the author relaxes this assumption, which is both unnecessarily strict and unrealistic. The contribution is twofold. First, he shows that when control is delegated during flotation, financial innovation is a trade-off between agency costs (arising from principal agent relationships) and targeting costs (arising from the inability to split the cash flow). Second, the author shows that unlevered equity or the use of debt, which can be issued without defaulting in equilibrium, is an optimal means of financing.

Suggested Citation

  • Instefjord, Norvald, 1998. "Financial Innovation and Delegation of Control," Economic Journal, Royal Economic Society, vol. 108(451), pages 1707-1732, November.
    • Handle: RePEc:ecj:econjl:v:108:y:1998:i:451:p:1707-32
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    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:ecj:econjl:v:108:y:1998:i:451:p:1707-32. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    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 (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.