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Corporate financing with loss aversion and disagreement

Weining Niu and Qingduo Zeng

Finance Research Letters, 2018, vol. 27, issue C, 80-90

Abstract: We build an equilibrium model to analyze the effect of loss aversion and disagreement on capital structure and stock price effect. It identifies that loss aversion has negative relation with capital structure and stock price effect without disagreement. However, in the case of disagreement between manager and outside investors, under different scale of probability of value gain, capital structure has different relation with loss aversion and disagreement level, and stock price effect has negative relation with loss aversion but has positively related with disagreement level. The numerical simulation results verify our theoretical findings to some extent.

Keywords: Loss aversion; Disagreement; Capital structure; Stock price effect (search for similar items in EconPapers)
JEL-codes: C61 D58 D82 G32 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:finlet:v:27:y:2018:i:c:p:80-90