Debt-financing under asymmetric information

Noe, Thomas, Goswami, Gautam and Rebello, Michael (1995) Debt-financing under asymmetric information. The Journal of Finance, 50 (2). pp. 633-659.

Abstract

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.

Item Type: Article
Keywords: debt financing; corporate debt; credit management; finance
Subject(s): Finance
Date Deposited: 10 Nov 2011 16:53
Last Modified: 02 Mar 2017 10:47
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/1138

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