Imperfect competition in financial markets and capital structure

Sergei Guriev, Dmitriy Kvasov

研究成果: Article

5 引用 (Scopus)

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We consider a model of corporate finance with imperfectly competitive financial intermediaries. Firms can finance projects either via debt or via equity. Because of asymmetric information about firms' growth opportunities, equity financing involves a dilution cost. Nevertheless, equity emerges in equilibrium whenever financial intermediaries have sufficient market power. In the latter case, best firms issue debt while the less profitable firms are equity-financed. We also show that strategic interaction between oligopolistic intermediaries results in multiple equilibria. If one intermediary chooses to buy more debt, the price of debt decreases, so the best equity-issuing firms switch from equity to debt financing. This in turn decreases average quality of equity-financed pool, so other intermediaries also shift towards more debt.

元の言語English
ページ(範囲)131-146
ページ数16
ジャーナルJournal of Economic Behavior and Organization
72
発行部数1
DOI
出版物ステータスPublished - 2009 10
外部発表Yes

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ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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