managinginternalequityandse(文件)
【正文】 0 mil. What’s a rational investor learn from this? Smith’s manager is optimistic and Jones’s is pessimistic. Jones’s manager is stupid to think that investor would pay $100. The attempt to sell stock shows that it must be worth less. What’s the result? both will issue debt! Sources and uses of fund in . nonfinancial corporations % 88 89 90 91 92 93 94 95 96 97 Internally 81 87 90 112 88 88 86 78 89 85 stock 26 27 14 3 6 4 7 8 9 14 debt 45 40 24 14 7 8 21 30 20 30 total 100 100 100 100 100 100 100 100 100 100 Models of costly external finance A. cost of equity finance adverse selection: managers’ timing— equity issue is bad news unable or unwilling to issuing equity. B. Cost of debt finance ? Adverse selection: managers will be more likely to borrow if their private info. suggests they are relatively prone to default. Models of costly external finance ? Costly verification model: 2 state: if debt are paid, no audit 。 a relatively bigger discount。 19631981, only less than 5% firms selected rights offering after 1982, no rights offering ? Japan B SEO: the cost of issuing ? Underwriter spread: a percentage of offering proceeds ? Adverse selection costs: negative mkt reaction ? Warrants to underwriter SEO ? Underwrite methods Firm mitment Best effort ? Issuing methods traditional shelf registration: matching with capital expenditures。 if earninginvestment gap, the reaction could be positive. M/B ratio AR ?Agency explanation: manager prefer equity, since debt increase the prb. of bankruptcy and loss of job. Also Free Cash Flow . O
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