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Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have / Stewart C. Myers, Nicholas S. Majluf.
- Format:
- Book
- Author/Creator:
- Myers, Stewart C.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w1396.
- NBER working paper series no. w1396
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1984.
- Summary:
- This paper considers a firm that must issue common stock to raise cash to undertake a valuable investment opportunity. Management is assumed to know more about the firm's value than potential investors. Investors interpret the firm's actions rationally. An equilibrium model of the issue-invest decision is developed under these assumptions.The model shows that firms may refuse to issue stock, and therefore may pass up valuable investment opportunities.The model suggests explanations for several aspects of corporate financing behavior, including the tendency to rely on internal sources of funds, and to prefer debt to equity if external financing is required. Extensions and applications of the model are discussed.
- Notes:
- Print version record
- July 1984.
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