Information aggregation through stock prices and the cost of capital

Arbeitspapier

This paper studies a firm´s optimal capital structure in an environment, where the firm´s stock price serves as a public signal for its credit worthiness. In equilibrium, equity investors choose how much information to acquire privately, which induces a positive relation between the amount of equity issued and the stock price signal´s precision. Thus, through its capital structure, the firm can internalize the informational externality that stock prices exert on bond yields. Firms with a strong fundamental therefore issue more equity and less debt than they would if the informational spill-over did not exist.

Objekt anzeigen

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Preprints of the Max Planck Institute for Research on Collective Goods ; No. 2013/18

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; General Financial Markets: General (includes Measurement and Data)
• Thema: information aggregation ; capital structure ; sequential markets ; market depth

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Gorelkina, Olga ; Kuhle, Wolfgang
• Ereignis: Veröffentlichung
• (wer): Max Planck Institute for Research on Collective Goods
• (wo): Bonn
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/84982