The Relevance Of Financial Policy
When the asset market is incomplete, equilibrium allocations are not invariant to changes in the financial policies of firms: in the presence of secondary assets, such as options, whose payoffs depend nonlinearly on the price of equity, the range of attainable reallocations of revenue varies as a firm alters its position in the asset market. Corporate financial policy is thus relevant. When assets are nominal, monetary policy implemented through open market operations is effective.
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- Gottardi Piero, 1994.
"On the Non-neutrality of Money with Incomplete Markets,"
Journal of Economic Theory,
Elsevier, vol. 62(1), pages 209-220, February.
- Gottardi, P., 1990. "On The Non Neutrality Of Money With Incomplete Market," Papers 158, Cambridge - Risk, Information & Quantity Signals.
- Eckwert, Bernhard, 1993. "Allocative effects of financial assets and the long run neutrality of money when markets are incomplete," European Economic Review, Elsevier, vol. 37(1), pages 75-95, January.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
- Hellwig, Martin F, 1981. "Bankruptcy, Limited Liability, and the Modigliani-Miller Theorem," American Economic Review, American Economic Association, vol. 71(1), pages 155-70, March.
- Joseph E. Stiglitz, 1972.
"On the Irrelevance of Corporate Financial Policy,"
Cowles Foundation Discussion Papers
339, Cowles Foundation for Research in Economics, Yale University.
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