Timing of investment and financing decisions in imperfectly competitive financial markets
Article Abstract:
A model wherein the investment decision is differentiated from the financing decision and both decisions are influenced by market variables is presented. The basic premises for the study are that companies can choose to delay project development and that financial markets are characterized by imperfect competition. The delaying of the project development is prompted by the belief that the economy will improve. The delay, however, has the potential to substantially lessen the value of the project in the future. The imperfect competition in the financial markets, on the other hand, leads to financing of lower-quality projects with equity and higher-quality projects with debt. The empirical implications of the dynamic model include higher volume of financing during an economic expansion, higher proportion of projects financed with equity relative to debt and increased volume of both types of financing during stock market increases.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1993
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Timing of convertible debt issues
Article Abstract:
A study was conducted to analyze whether the timing of convertible debt issues can be explained by three reasons for its usage as a financial medium. The long-standing views that convertibles are utilized as 'debt sweeteners' and that there are 'hot issue' markets for these securities were examined. Results indicated that corporate managers issue convertible debt as debt sweeteners and that more convertible debt is issued in hot markets.
Publication Name: Journal of Business Research
Subject: Business, general
ISSN: 0148-2963
Year: 1999
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