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Project financing versus corporate financing under asymmetric information

Author

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  • Anton Miglo

    () (University of Guelph, Department of Economics)

Abstract

In recent years financing through the creation of an independent project company or financing by non-recourse debt has become an important part of corporate decisions. Shah and Thakor (JET, 1987) argue that project financing can be optimal when asymmetric information exists between firm's insiders and market participants. In contrast to that paper, we provide an asymmetric information argument for project financing without relying on corporate taxes, costly information production or an assumption that firms have the same mean of return. In addition, the model generates new predictions regarding asset securitization

Suggested Citation

  • Anton Miglo, 2008. "Project financing versus corporate financing under asymmetric information," Working Papers 0812, University of Guelph, Department of Economics and Finance.
  • Handle: RePEc:gue:guelph:2008-12
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    File URL: http://www.uoguelph.ca/economics/repec/workingpapers/2008/2008-12.pdf
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    References listed on IDEAS

    as
    1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    asymmetric information; non-recourse debt; project-financing; asset securitization.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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