Corporate Policies In A World With Information Asymmetry

A corporate manager typically oversees several ongoing projects and has the opportunity to invest in new projects that add wealth to the stockholders. Such new projects include expanding the corporation's existing business, entering into a new line of business, acquiring another business, and so on. If the firm does not have sufficient internal capital (cash) to finance the initial investment, the manager must enter into a transaction with outside investors to raise additional funds. In this situation, the manager of a public corporation faces two key decisions: Should he transact with outside investors and raise the necessary capital to invest in the project? The answer to this question determines the firm's investment policy.If the manager decides to raise external capital how should the investment be financed — with debt, with equity, or with some other security? The answer determines the firm's financing policy. Modern corporate finance theory, originating with the seminal work of Merton Miller and Franco Modigliani, has demonstrated that these decisions depend on the information that the manager and investors have about the firm's future cash flows. In this book, the authors examine these decisions by assuming that the manager has private information about the firm's future cash flows. They provide a unified framework that yields new theoretical insights and explains many empirical anomalies documented in the literature. Contents:IntroductionBasic Setup:Firm and Its Capital NeedsOutside Investors and SecuritiesRaising CapitalRaising Capital When There is Symmetric Information:Information and Decision-Making with Symmetric InformationOptimal Capital-Raising Decisions and Their Implications for Firm PoliciesRaising Capital with Information Asymmetry:Information and Decision-Making with Information AsymmetryOptimal Capital-Raising Decisions and Their Implications: Any Security SpaceAdditional Implications Specific to the Debt-Equity Security SpaceNumerical Illustrations of Key Financing Policy Results Under the Debt–Equity Security SpaceEmpirical Predictions and Implications for Practitioners: Debt–Equity Security SpaceConcluding RemarksAppendix Readership: Master and doctoral level students in finance, academic researchers and financial managers. Keywords:Information Asymmetry;Financing Decisions;Capital Structure;Dividend PolicyKey Features:Proposes a unified framework that contains all existing models as special casesExplains many empirical anomalies in the literature and provide guidance for better empirical tests

Asymmetric information (the fact that borrowers have better information than their lenders) and its theoretical and practical evidence now forms part of the basic tool kit of every financial economist. It is a phenomenon that has major implications for a number of economic and financial issues ranging from both micro and macroeconomic level - corporate debt, investment and dividend policies, the depth and duration of business cycles, the rate of long term economic growth - to the origin of financial and international crises. Asymmetric Information in Financial Markets aims to explain this concept in an accessible way, without jargon and by reducing mathematical complexity. Using elementary algebra and statistics, graphs, and convincing real-world evidence, the author explores the foundations of the problems posed by asymmetries of information in a refreshingly accessible and intuitive way.

Advertising is a company's major form of communication with the market; it is a component of the IMC system, having a special impact on the addressee, and is a form of persuasive communication affecting consumer behaviour. Advertising may reflect information asymmetry between an advertiser and recipients. This book presents an assessment of the forms and range of consumer behaviour manipulation through information asymmetry in online advertising and explores the possible causes, forms, and effects. The work offers a new approach to the role of advertising in the digital world, especially its forms and impact strategies. The theoretical framework presented is based on issues related to online advertising, information asymmetry, and social manipulation. The book describes the ways in which these areas can be explored, and it presents the results of empirical studies. Empirical research allows for identifying companies' moral hazard strategies and their consequences - e-consumers' adverse selection. The research provides an empirical answer to the question: to what extent is advertising a transparent form of communication, and to what extent does it represent the world of manipulation? Based on an interdisciplinary theoretical approach, empirical studies conducted by the authors, and theoretical and managerial implication, the book encourages its readers to find their own answers. Given the interdisciplinary nature of this work, it will be of interest to scholars and researchers within the fields of marketing, media and communication, economics, psychology, sociology, and ethics.

As China has blended market reforms with comprehensive industrial policies, most research has focused on the national government's strategies for economic growth. However, one of the unique characteristics of industrial policy in China is that it involves government intervention at all levels, from the political elite all the way down to village leaders. This book focuses on the domestic appliance industry, and China's three major business groups in this area - Haier, Hisense and Aucma. The Haier Group, in particular, is one of the most successful and competitive enterprises in China and is very well-placed to compete globally as the Chinese economy becomes more integrated with the world trading system. This volume shows how industrial policy is formulated at the national level and implemented at the local level, and examines how local government frequently intervenes in local enterprises' business strategy and management. Of practical importance, this book provides academics, business people and policy makers with valuable insights into the development process and a concrete understanding of the challenges faced in the global business revolution by one of the world's most dynamic economies.

Taking an international perspective to corporate finance, the latest edition of Corporate Finance and Investment is a highly-regarded and established text for students who want to understand the principles of corporate finance and develop the key tools to apply it. The ninth edition has been revised to include topical issues in valuation, working capital, capital structure, the dividend decision, Islamic finance, risk and risk management, and behavioural finance. With its focus on strategic issues of finance in a business setting, this text uses the latest financial and accounting data, articles and research papers to effectively demonstrate how, and to what extent, the theory can be applied to practical issues in corporate finance.

In credit markets, asymmetric information problems arise when borrowers have private information about their creditworthiness that is not observable by lenders. If these informational asymmetries do not negatively affect lenders' profitability, then they are irrelevant to lenders.