Simultaneous Signalling to the Capital and Product Markets

Robert Gertner, Robert Gibbons and David Scharfstein

RAND Journal of Economics, 1988, vol. 19, issue 2, 173-190

Abstract: In this article we analyze an informed firm's choice of financial structure when the financing contract is observed not only by the capital market but also by a second uninformed party, such as a competing firm. The informed firm's gross profit is endogenous, because the second party's action depends on the transaction it observes between the informed firm and the capital market. The main result is that the reasonable capital-market equilibria maximize the ex ante expectation of the informed firm's endogenous gross profits. In distinct contrast to earlier work, which focuses on separating equilibria, in our model it is often the case that all the reasonable equilibria are pooling.

Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (86)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819882 ... O%3B2-T&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: Simultaneous signaling to the capital and product markets (1987)
Working Paper: Simultaneous Signaling to the Capital and Product Markets (1987)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:19:y:1988:i:summer:p:173-190

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().