Information production, dilution costs, and optimal security design

• 成果类型: Article
• 署名作者: Fulghieri, P; Lukin, D
• 署名单位: INSEAD Business School; Centre for Economic Policy Research - UK; University of California System; University of California Irvine
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(01)00054-X
• 发表日期: 2001
• 页码: 3-42
• 关键词: Security design; Information production; pecking order theory

摘要

We investigate the problem of a firm wishing to finance a project by issuing securities under asymmetric information. We find that, when outside investors can produce (noisy) information on the firm's quality, the degree of information asymmetry resulting in equilibrium is endogenous and depends on the information sensitivity of the security issued. Thus, in contrast to the prediction of the pecking order theory (see, e.g. Myers and Majluf, J. Financial Econom. 13 (1984) 187-221) a security with low sensitivity to private information, such as debt, does not always dominate one with high information sensitivity, such as equity. A firm's preference for equity rather than debt depends on the costs of information production, the precision of the information-production technology, and the extent of the information asymmetry. We also study the optimal security design problem and find that, depending on the cost and precision of the information-production technology, risky debt or a composite security with a convex payoff emerges as optimal securities. (C) 2001 Elsevier Science S.A. All rights reserved.