Work

Equilibrium with Debt and Equity Financing of New Projects: Why More Equity Financing Occurs When Stock Prices are High

Year: 1987

Type: report

Abstract: In this paper we analyze the manager's financing decision for a new project. We give the manager a choice between financing with debt or equity, or foregoing the project. Our purpose is to provide a signaling model in which debt, equity and foregoing are actually observed in the unique equilibrium and the financing mode provides information to the investors about the quality of the new project to be financed.

Source: Deep Blue (University of Michigan)

Authors: Mark Bagnoli, Naveen Khanna

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W79962010

Cites: 19

Cited by: 9

Related to: 10