< Terug naar vorige pagina

Publicatie

The revealed preference approach to collective consumption behavior: testing and sharing rule recovery

Tijdschriftbijdrage - Tijdschriftartikel

Informational asymmetries between a firm and investors may lead to adverse selection in capital markets. This paper demonstrates that when the market obtains noisy information about a firm over time, this adverse selection problem can be costlessly solved by issuing callable convertible bonds with restrictive call provisions. Such securities can be designed to make the payoff to new claimholders independent of the private information of the manager. This eliminates the possibility of any dilution of equity or underinvestment and implements the symmetric information outcome in either a pooling or a separating equilibrium. The same first-best efficient outcome can also be implemented by issuing floating-price and mandatory convertibles.
Tijdschrift: The Review of Economic Studies
ISSN: 0034-6527
Issue: 1
Volume: 78
Pagina's: 176 - 198
Jaar van publicatie:2011
BOF-keylabel:ja
IOF-keylabel:ja
BOF-publication weight:6
CSS-citation score:2
Auteurs:International
Authors from:Higher Education
Toegankelijkheid:Closed