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Timing of Investment and Financial Decisions in Imperfectly Competitive Financial Markets

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  • Berkovitch, Elazar
  • Narayanan, M P

Abstract

The authors present a model in which firms can time their projects. They show that financing and investment decisions are interrelated if financial markets are not perfectly competitive, resulting in apparent timing of financing decisions. The authors obtain the result that the proportion of equity financing relative to debt is higher when economic conditions are improving. They also show that the type of financing depends both on current and past economic conditions. Finally, the authors show that there will be relatively more equity financing in industries in which obsolescence is more likely. Copyright 1993 by University of Chicago Press.

Suggested Citation

  • Berkovitch, Elazar & Narayanan, M P, 1993. "Timing of Investment and Financial Decisions in Imperfectly Competitive Financial Markets," The Journal of Business, University of Chicago Press, vol. 66(2), pages 219-248, April.
    • Handle: RePEc:ucp:jnlbus:v:66:y:1993:i:2:p:219-48
    DOI: 10.1086/296602
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    Cited by:

    1. Miglo, Anton, 2007. "Debt-equity choice as a signal of earnings profile over time," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(1), pages 69-93, March.
    2. Miglo, Anton & Wu, Congsheng, 2014. "Asymmetric Information and IPO Size," MPRA Paper 56550, University Library of Munich, Germany.
    3. Miglo, Anton, 2012. "Multi-stage investment, long-term asymmetric information and equity issues," MPRA Paper 46692, University Library of Munich, Germany.
    4. Miglo, Anton, 2006. "Debt-equity choice as a signal of profit profile over time," MPRA Paper 1283, University Library of Munich, Germany.

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