Following some recent empirical papers we focus on the key feature of Pecking-order theory (POT) - the existence and the extent of asymmetric information between firms' insiders and outsiders. We analyze the debt-equity choice for financing a two-stage investment and consider different...

This paper shows that asymmetric information about the timing of earnings can affect corporate capital structure. It sheds new light on the following issues: why profitable firms may be interested in issuing equity and why debt does not necessarily signal a firm's quality. These issues seem to...

This paper analyzes the debt-equity choice for financing a two-stage investment when a firm's insiders have private information about the firm's expected earnings. When private information is one-dimensional (for example when short-term earnings are common knowledge while long-term earnings are...

Existing literature on property rights stresses the effect that distortions in future investment decisions have on establishing the optimal property rights. This paper demonstrates that property rights may also be affected by contracts, which exist prior to the establishment of property rights....

Brennan and Kraus (1987) show that an efficient separating equilibrium in a financing game where the firms have private information about their cash flows does not exist if the cash flows are ordered by the first-order dominance condition. In the present note we relax their assumption about cash...

In this paper we analyze a firm choice between crowdfunding and bank financing. The interplay of these two important types of financing for entrepreneurial firms has not been extensively studied in existing literature while for many entrepreneurs it is an important issue. We analyze a model...

This book focuses on microeconomic foundations of capital structure theory. It combines theoretical results with a large number of examples, exercises and applications. The book examines fundamental ideas in capital structure management, some of which are still not very well understood in the...

According to Graham and Harvey (2001), an immense gap exists between capital structure theories and practice. By analyzing students’ perception of capital structure theories and the differences between their opinion and that of the current CEO’s and managers this paper argues that this can...