Noe, Thomas, Goswami, Gautam and Rebello, Michael (1995) Debt-financing under asymmetric information. The Journal of Finance, 50 (2). pp. 633-659.
The authors analyze the optimal design of debt maturity, coupon payments, and dividend payout restrictions under asymmetric information. They show that, if the asymmetry of information is concentrated around long-term cash flows, firms finance with coupon-bearing long-term debt that partially restricts dividend payments. If the asymmetry of information is concentrated around near-term cash flows and there exists considerable refinancing risk, firms finance with coupon-bearing long-term debt that does not restrict dividend payments. Finally, if the asymmetry of information is uniformly distributed across dates, firms finance with short-term debt.
|Keywords:||debt financing; corporate debt; credit management|
|Centre:||Faculty of Finance|
|Date Deposited:||10 Nov 2011 16:53|
|Last Modified:||23 Oct 2015 14:06|
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