Corporate Financing: An Artificial Agent-based Analysis
We examine corporate security choice by simulating an economy populated by adaptive agents who learn about the structure of security returns and prices through experience. Through a process of evolutionary selection, each agent gravitates toward strategies that generate the highest payoffs. Despite the fact that markets are perfect and agents maximize value, a financing hierarchy emerges in which straight debt dominates other financing choices. Equity and convertible debt display significant underpricing. In general, the smaller the probability of loss to outside investors, the more likely the firm is to issue the security and the smaller the security's underpricing. Copyright 2003 by the American Finance Association.
Year of publication: |
2003
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Authors: | Noe, Thomas H. ; Rebello, Michael J. ; Wang, Jun |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 58.2003, 3, p. 943-973
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Publisher: |
American Finance Association - AFA |
Saved in:
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