Multi-stage investment, long-term asymmetric information and equity issues

Anton Miglo

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze equity financing for a two-stage investment and consider different informational structures. When private information is short-term, equilibria are consistent with signalling theory and pecking-order theory. When private information is long-term, equilibria may exist where high quality firms issue equity. The model explains the link between debt-equity choice and subsequent performance after issue (short-term versus long-term). A set of new predictions is generated regarding the link between the extent of asymmetric information and equity issues, macroeconomic performance and equity issues and market timing.

Keywords: equity issues; long-term asymmetric information; multi-stage investment; pecking-order theory; signalling (search for similar items in EconPapers)
JEL-codes: D82 G32 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cta and nep-mic
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Citations: View citations in EconPapers (5)

Published in Journal of Current Issues in Finance, Business and Economics 4.4(2012): pp. 331-348

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:46692

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