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On Debt Financing and Investment Timing

  • Paolo M. Panteghini

    ()

    (Dipartimento di Scienze Economiche, Università di Brescia, Italy)

This paper studies the relationship between debt-financing and the timing of investment, under asymmetric information. In particular we show that an option to delay raises the average profitability of firms who choose to invest immediately, thereby reducing the market interest rate on debt. Moreover, the option to delay is shown to be welfare improving.

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File URL: http://www.taloustieteellinenyhdistys.fi/images/stories/fep/f2002_2e.pdf
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Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 15 (2002)
Issue (Month): 2 (Autumn)
Pages: 110-114

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Handle: RePEc:fep:journl:v:15:y:2002:i:2:p:110-114
Contact details of provider: Web page: http://www.taloustieteellinenyhdistys.fi

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  1. Vercammen, James, 2000. "Irreversible investment under uncertainty and the threat of bankruptcy," Economics Letters, Elsevier, vol. 66(3), pages 319-325, March.
  2. Lensink, Robert & Sterken, Elmer, 1999. "Asymmetric information, option to wait to invest and the optimal level of investment," CCSO Working Papers 199917, University of Groningen, CCSO Centre for Economic Research.
  3. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  4. Kanniainen, Vesa & Keuschnigg, Christian, 2004. "Start-up investment with scarce venture capital support," Journal of Banking & Finance, Elsevier, vol. 28(8), pages 1935-1959, August.
  5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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