Multi-stage financing and the winner's curse

Archishman Chakraborty () and Bilge Yilmaz ()
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Bilge Yilmaz: Finance Department, The Wharton School, University of Pennsylvania

Economics Bulletin, 2003, vol. 4, issue 32, pages 1-8

Abstract: Raising cash in multiple stages can lower financing costs for an entrepreneur faced with multiple, differentially informed, strategic investors. By affecting investor incentives to participate in different rounds, the winner's curse problem can be partially alleviated. The results offer insight into the choice of the relative size of an IPO versus a SEO, and into gradual and partial privatization strategies.

Keywords: financing costs; information rents; winner's curse (search for similar items in EconPapers)
JEL-codes: D8 G3 (search for similar items in EconPapers)
Date: 2003-10-17
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