Cash flow correlation, debt maturity choice and asymmetric information

Noe, Thomas, Goswami, Gautam and Rebello, Michael (1996) Cash flow correlation, debt maturity choice and asymmetric information. In: Lee, Cheng-Few, (ed.) Advances in Financial Planning and Forecasting. JAI Press. ISBN 978-1559389761

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Abstract

In an asymmetric information framework, a number of authors have demonstrated the existence and uniqueness of short-term debt pooling equilibria in the absence of dissipative costs. We show that short-term debt pooling is robust to a broad range of deviations from stationarity and intertemporal independence. However, with intertemporal dependence, separating equilibria exist in which short-term debt signals favourable information. Non-stationary allows for separating equilibria in which long-term debt signals favourable information. A range of deviations from stationarity and intertemporal independence also support long-term debt pooling equilibria.

Item Type: Book Section
Keywords: Asymmetric information; Debt
Subject(s): Finance
Date Deposited: 25 Mar 2012 19:48
Last Modified: 21 Sep 2016 11:49
URI: http://eureka.sbs.ox.ac.uk/id/eprint/2890

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