Capital Flows with Debt- and Equity-Financed Investment-Equilibrium Structure and Efficiency Implications

This paper distinguishes between debt and equity flows in the presence of information asymmetry between the firm's "insiders" and "outsiders" in a small open economy. It shows the inadequacy of capital investment because its scope is too narrow and the investment each firm m...

Full description

Main Author: Razin, Assaf
Other Authors: Sadka, Efraim, Yuen, Chi-Wa
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1998, 1998
Series:IMF Working Papers; Working Paper
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Summary:This paper distinguishes between debt and equity flows in the presence of information asymmetry between the firm's "insiders" and "outsiders" in a small open economy. It shows the inadequacy of capital investment because its scope is too narrow and the investment each firm makes is too little. An unconventional policy tool is proposed to correct the market failure: lump-sum subsidies to firms that choose to equity-finance their investments
Physical Description:21 p.
ISBN:1451857640
9781451857641