Stock Issues and Investment Policy When Firms Have Information That Investors Do Not Have

Stewart C. Myers and Nicholas S. Majluf

No 884, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper describes corporate investment and financing decisions when managers have inside information about the value of the firm's existing investment and growth opportunities, but cannot convey that information to investors. Capital markets are otherwise perfect and efficient. In these circumstances, the firm may forego a valuable investment opportunity rather than issue stock to finance it. The decision to issue cannot fully convey the managers' special information. If stock is issued, stock price falls. Liquid assets or financial slack are valuable if they reduce the probability or extent of stock issues. The paper also suggests explanations for some aspects of dividend policy and choice of capital structure.

Date: 1982-04
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Myers, Stewart C. and Nicholas S. Majluf. "Corporate Financing And Investment Decisions When Firms Have Information That Investors Do Not Have," Journal of Financial Economics, 1984, v13(2), 187-221.

Downloads: (external link)
http://www.nber.org/papers/w0884.pdf (application/pdf)

Related works:
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:nbr:nberwo:0884

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w0884

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().