Investment, Security Design and Information

Gabrielle Demange and Guy Laroque

Chapter 11 in Banking, Capital Markets and Corporate Governance, 2001, pp 272-288 from Palgrave Macmillan

Abstract: Abstract We consider the decisions of a venture capitalist who starts a new project. The prospects for the resale values of the newly created firm(s) are important features of the choice of the project. We assume that they crucially depend on the state of information when the firms are offered on the stock market. Such information is likely to be asymmetric, which typically discourages the general public to invest in the new firms. This market imperfection influences the initial choices of the capitalist: it favours the projects where the asymmetry of information is the least pronounced (or, equivalently in our model, the risks born by the investor are smaller), and projects whose risk characteristics may be useful as a hedge to the market at large.

Keywords: Stock Market; Corporate Governance; Venture Capitalist; Initial Public Offering; Risk Characteristic (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Investment, Security Design and Information (2002)
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:pal:palchp:978-0-230-28814-0_11

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230288140

DOI: 10.1057/9780230288140_11

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().