Security Design

Arnoud Boot and Anjan Thakor ()

CEPR Financial Markets Paper from European Science Foundation Network in Financial Markets, c/o C.E.P.R, 33 Great Sutton Street, London EC1V 0DX.

Abstract: The paper explains why an issuer may wish to raise external capital by selling multiple financial claims that partition its total asset cash flows, rather than a single claim. It is shown that in an asymmetric information environment, the issuer's expected revenue is enhanced by such cash flow partitioning because it makes informed trade more profitable. This approach seems capable of shedding light on corporate incentives to issue debt and equity, as well as on financial intermediaries' incentives to issue multiple classes of claims against portfolios of securitized assets.

Keywords: Security Design; External Financing; Capital Structure; Mean- Variance Efficiency; Information (search for similar items in EconPapers)
Date: 1992-11
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Journal Article: Security Design (1993)
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