Mezzanine as an alternative form of corporate financing

Corporate Investment and Financing Dynamics∗

This paper studies the behavior of leverage ratios in a dynamic trade-off model with real frictions. Firms underutilize debt when financing investment to retain financial flexibility. Underutilization of debt persists even when firms exercise their last investment options, and it is more (less) severe for more back-loaded (front-loaded) investment opportunities. Thus, leverage dynamics cruciall...

Corporate Access to External Financing

Access to external finance, such as bank loans or trade credit, is a key determinant of a firm’s ability to develop, operate, and expand. Economic researchers have studied how various macroeconomic and microeconomic factors influence such access; for example, it has been shown to depend on the macroeconomic environment, since economic downturns tend to limit firms’ ability to borrow and banks’ ...

Corporate Financing: An Arti¢cial Agent-based Analysis

We examine corporate security choice by simulating an economy populated by adaptive agents who learn about the structure of security returns and prices through experience. Through a process of evolutionary selection, each agent gravitates toward strategies that generate the highest payo¡s. Despite the fact that markets are perfect and agents maximize value, a ¢nancing hierarchy emerges in which...

Information Asymmetry, Corporate Debt Financing and Optimal Investment Decisions: A Reduced Form Approach

Under the assumption of information asymmetry between market investors and firm managers, a reduced form model of a firm is developed in order to derive optimal investment strategies and capital structures while taking into account the effects of dividend policies and taxes. The motivation of the reduced form approach lies in its empirical implementation tractability. Closed-form solutions for ...

New Perspectives on Financing Small Cap Sme’s in Emerging Markets the Case for Mezzanine Finance