SECURITY DESIGN

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 f low partitioning because it makes informed trade more profitable. This approach seems capable of shedding light on corporate incentives to i ssue debt and equity, as well as on financial intermediaries' incentiv es to issue multiple classes of claims against portfolios of securitiz ed assets.