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Multi-stage investment, long-term asymmetric information and equity issues

  • Miglo, Anton

We analyze equity financing for a two-stage investment and consider different informational structures. When private information is short-term, equilibria are consistent with signalling theory and pecking-order theory. When private information is long-term, equilibria may exist where high quality firms issue equity. The model explains the link between debt-equity choice and subsequent performance after issue (short-term versus long-term). A set of new predictions is generated regarding the link between the extent of asymmetric information and equity issues, macroeconomic performance and equity issues and market timing.

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File URL: http://mpra.ub.uni-muenchen.de/46692/8/MPRA_paper_46692.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46692.

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Date of creation: 2012
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Publication status: Published in Journal of Current Issues in Finance, Business and Economics 4.4(2012): pp. 331-348
Handle: RePEc:pra:mprapa:46692
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Web page: http://mpra.ub.uni-muenchen.de

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