Dissertation Information for John Robert O'BrienNAME:
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SCHOOL: ADVISORS: COMMITTEE MEMBERS: MPACT Status: Incomplete - Not_Inspected Title: PRIVATE INFORMATION, COMMUNICATION AND THE INCENTIVE PROPERTIES OF CAPITAL STRUCTURE
Abstract: One of the deep results of modern corporate finance theory was the Modigliani and Miller discovery, that equilibrium in a world with perfect capital markets implied that the firm's value is independent of its financing mix given any investment decision. From the veritable avalanche of subsequent literature it has been the relatively recent works, with informational constraints present, which have provided interesting new insight into some of the persistently observed capital structure behavior. In this dissertation the equilibrium behavior of the firm's external financing decision will be analysed in a managerial economy in which the manager possesses better information than outside agents. From this analysis new insight will be provided into the equilibrium emergence of the persistently observed pecking order for external finance and the apparent informational content of the firm's financing decision. In the economy analysed, there are no exogenous costs such as taxes or bankruptcy costs and thus the results depend upon the nature of the debt and equity financial contracts. These contracts plus the combination of an adverse selection problem and risk sharing, can result in the simultaneous emergence of debt and equity in equilibrium. |
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