Chakraborty, Archishman (contributor); … - 2004
the management to separate by signaling its type and thus solve the under-investment prob-
lem. Since separation by … exogenously, prior to the call period, and no new private information arrives. Furthermore,
the management always calls to force … common knowledge that the manager has bad news,
i.e., θ = θ
1
.Thatis,F
∗
satisfies
D
1
(F
∗
)=1. (8)
Hence, the debt part of …