Financing Multiple Investment Projects

Volume 22 Number 2

Financial Management, 1993, vol. 22, issue 2

Abstract: Although the finance literature has rigorously analyzed many dimensions of the "capital structure" question, little has been written about the optimal means of issuing multiproduct firms' securities. We show in this paper that a multiproduct firm can importantly influence its total market value by choosing the most appropriate arrangement for its stock and debt issues. Consider a firm which wishes to invest in two risky projects, whose initial owners must issue external debt and/or equity to implement these projects. We determine whether multiple projects should be operated within a single firm, or in separate legal subsidiaries of a holding company.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:fma:fmanag:flannery93

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