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Aa adequate "financial architecture' for new economy firms

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  • Danny Cassimon
  • Peter-Jan Engelen

Abstract

This paper develops a framework for devising an adequate financial architecture for the so-called "new economy" firms, suggesting that these firms need a distinct and different optimal capital structure and corporate control or corporate governance mechanisms. It is shown that an adequate financial architecture typically includes mechanisms with in-built option characteristics, such as the use of near-equity financing instruments (convertible bonds, or bonds-cum-warrants, which are all debt financing vehicles with in-built financial options) and the use of stock options. It is also shown that this financial architecture can be tailor-made to accommodate different types of new economy firms with the above-mentioned characteristics.

Suggested Citation

  • Danny Cassimon & Peter-Jan Engelen, 2001. "Aa adequate "financial architecture' for new economy firms," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 3(2), pages 200-211.
    • Handle: RePEc:ids:gbusec:v:3:y:2001:i:2:p:200-211
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    Cited by:

    1. Cassimon, Danny & Engelen, Peter-Jan, 2005. "Impact of the legal and institutional framework on the financial architecture of new economy firms in developing countries," Information Economics and Policy, Elsevier, vol. 17(2), pages 247-269, March.
    2. Danny Cassimon & Peter-Jan Engelen, 2002. "Legal and Institutional Barriers to Optimal Financial Architecture for New Economy Firms in Developing Countries," WIDER Working Paper Series DP2002-90, World Institute for Development Economic Research (UNU-WIDER).

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