Capital Flows with Debt- and Equity-Financed Investment-Equilibrium Structure and Efficiency Implications [electronic resource] / Assaf Razin.
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TextSeries: IMF Working Papers; Working Paper ; No. 98/159Publication details: Washington, D.C. : International Monetary Fund, 1998Description: 1 online resource (21 p.)ISBN: 1451857640 :ISSN: 1018-5941Subject(s): Asymmetric Information | Capital Flows | Capital Market | Corrective Policy | Debt and Equity | Efficient Capital Flows | Argentina | Hong Kong Special Administrative Region of China | IsraelAdditional physical formats: Print Version:: Capital Flows with Debt- and Equity-Financed Investment-Equilibrium Structure and Efficiency ImplicationsOnline resources: IMF e-Library | IMF Book Store Abstract: 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.
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.
Description based on print version record.
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