Screening, Market Signalling, and Capital Structure Theory
This paper develops an equilibrium model in which informational asymmetries about the qualities of products offered for sale are resolved through a mechanism which combines the signalling and costly screening approachs. The model is developed in the context of a capital market setting in which bondholders produce costly information about a firm's priori imperfectly known earnings distribution and use this information in specifyihng a bond valuation schedule to the firm. Given this schedule, the firm's optimal choices of debt-equity ratio and debt maturity structure subsequently signal to prospective shareholders the relevant parameters of the firm's earnings distribution.
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- Talmor, Eli, 1981. "Asymmetric Information, Signaling, and Optimal Corporate Financial Decisions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(04), pages 413-435, November.
- W. Kip Viscusi, 1978. "A Note on "Lemons" Markets with Quality Certification," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 277-279, Spring.
- Thakor, Anjan V, 1982.
" An Exploration of Competitive Signalling Equilibria with "Third Party" Information Production: The Case of Debt Insurance,"
Journal of Finance,
American Finance Association, vol. 37(3), pages 717-739, June.
- Anjan V. Thakor, 2004. "An Exploration of Competitive Signalling Equilibria with 'Third Party' Information Production: The Case of Debt Insurance," Finance 0411028, EconWPA.
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- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374. Full references (including those not matched with items on IDEAS)
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