THE RELATIONSHIP BETWEEN OWNERSHIP, FINANCING DECISIONS AND FIRM PERFORMANCE - A SIGNALING MODEL

Authors
BAJAJ M CHAN YS DASGUPTA S
Citation
M. Bajaj et al., THE RELATIONSHIP BETWEEN OWNERSHIP, FINANCING DECISIONS AND FIRM PERFORMANCE - A SIGNALING MODEL, International economic review, 39(3), 1998, pp. 723-744
Citations number
22
Categorie Soggetti
Economics
Journal title
International economic review → ACNP
ISSN journal
00206598
Volume
39
Issue
3
Year of publication
1998
Pages
723 - 744
Database
ISI
SICI code
0020-6598(1998)39:3<723:TRBOFD>2.0.ZU;2-U
Abstract
We develop a signaling model to show how adverse selection and moral h azard interact to determine a firm's ownership structure and financing and investment decisions endogenously. Testable implications are deri ved regarding the relationship between insider ownership, performance measures such as Tobin's Q ratio, and elements of financial structure such as the debt-equity ratio.