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A General Equilibrium Corporate Finance Theorem for Incomplete Markets: A Special Case

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This paper considers corporate equilibria in a two period endogenized asset general equilibrium model for a class of profit maximizing objective functions of the firms introduced in Stiefenhofer (2009). It shows by means of a particular case that for a fixed financial policy, every extensive form stock market equilibrium can be translated into a reduced form equilibrium. This suggests determinateness of corporate equilibria for varying financial parameters. A change in the firm's financial policy changes the production set available to it in the next period, hence real effects.

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  • P Stiefenhofer, 2010. "A General Equilibrium Corporate Finance Theorem for Incomplete Markets: A Special Case," Discussion Papers 10/11, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:10/11
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