Security Design

ARNOUD W.A. BOOT; ANJAN V. THAKOR

doi:10.1111/j.1540-6261.1993.tb04757.x

Security Design

ARNOUD W.A. BOOT
, ANJAN V. THAKOR

Research output: Contribution to journal › Article › peer-review

191 Scopus citations

Abstract

We explain why an issuer may wish to raise external capital by selling multiple financial claims that partition its total asset cash flows, rather than a single claim. We show that, in an asymmetric information environment, the issuer's expected revenue is enhanced by such cash flow partitioning because it makes informed trade more profitable. This approach seems capable of shedding light on corporate incentives to issue debt and equity, as well as on financial intermediaries' incentives to issue multiple classes of claims against portfolios of securitized assets. 1993 The American Finance Association

Original language	English
Pages (from-to)	1349-1378
Number of pages	30
Journal	The Journal of Finance
Volume	48
Issue number	4
DOIs	https://doi.org/10.1111/j.1540-6261.1993.tb04757.x
State	Published - Sep 1993

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AB - We explain why an issuer may wish to raise external capital by selling multiple financial claims that partition its total asset cash flows, rather than a single claim. We show that, in an asymmetric information environment, the issuer's expected revenue is enhanced by such cash flow partitioning because it makes informed trade more profitable. This approach seems capable of shedding light on corporate incentives to issue debt and equity, as well as on financial intermediaries' incentives to issue multiple classes of claims against portfolios of securitized assets. 1993 The American Finance Association

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Security Design

Abstract

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