Equilibrium Corporate Finance

Alberto Bisin, Piero Gottardi and Guido Ruta

No ECO2010/01, Economics Working Papers from European University Institute

Abstract: We study a general equilibrium model with production where financial markets are incomplete. At a competitive equilibrium firms take their production and financial decisions so as to maximize their value. We show that shareholders unanimously support value maximization. Furthermore, competitive equilibria are constrained Pareto efficient. Finally the Modigliani-Miller theorem typically does not hold and the firms’ corporate financing structure is determined at equilibrium. Such results extend to the case where informational asymmetries are present and contribute to determine the firms’ capital structure.

Keywords: capital structure; competitive equilibria; incomplete markets; asymmetric information (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-bec and nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://cadmus.eui.eu/dspace/bitstream/1814/13221/1/ECO_2010_01.pdf main text
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://cadmus.eui.eu/dspace/bitstream/1814/13221/1/ECO_2010_01.pdf [301 Moved Permanently]--> https://cadmus.eui.eu/dspace/bitstream/1814/13221/1/ECO_2010_01.pdf)

Related works:
Working Paper: Equilibrium corporate finance (2009)
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:eui:euiwps:eco2010/01

Access Statistics for this paper

More papers in Economics Working Papers from European University Institute Badia Fiesolana, Via dei Roccettini, 9, 50014 San Domenico di Fiesole (FI) Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Cécile Brière ().