28-31 August 2018
Angers - France
Europe/Paris timezone

Optimal financing and investment strategies under asymmetric information about collateral value

30 Aug 2018, 12:30
30m
Angers - France

Angers - France

Speaker

Prof. Takashi Shibata (Tokyo Metropolitan University)

Description

We examine the interactions between financing (capital structure) and investment decisions of a firm under asymmetric information about collateral (liquidation) value between well-informed managers and less-informed investors. We show that asymmetric information reduces the amount of debt issuance to finance the cost of investment, that leads to delay corporate investment. In particular, an increase in the degree of asymmetric information forces the firm to be a risk-free debt-equity financing (ultimately be the all-equity financing) by reducing the amount of debt issuance. In addition, an increase in the cash flow volatility decreases the amount of debt issuance, credit spread, and leverage under asymmetric information. Our results fit well with empirical studies. This is a joint work with Michi Nishihara.

Primary author

Prof. Takashi Shibata (Tokyo Metropolitan University)

Presentation Materials

There are no materials yet.
Your browser is out of date!

Update your browser to view this website correctly. Update my browser now

×