ITEM METADATA RECORD
Title: The revealed preference approach to collective consumption behavior: testing and sharing rule recovery
Authors: Cherchye, Laurens ×
De Rock, Bram
Vermeulen, Frederic #
Issue Date: 2011
Series Title: The Review of Economic Studies vol:78 issue:1 pages:176-198
Abstract: Informational asymmetries between a firm and investors may lead to adverse selection in capital markets. This paper demonstrates that when the market obtains noisy information about a firm over time, this adverse selection problem can be costlessly solved by issuing callable convertible bonds with restrictive call provisions. Such securities can be designed to make the payoff to new claimholders independent of the private information of the manager. This eliminates the possibility of any dilution of equity or underinvestment and implements the symmetric information outcome in either a pooling or a separating equilibrium. The same first-best efficient outcome can also be implemented by issuing floating-price and mandatory convertibles.
ISSN: 0034-6527
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center of Public Economics, Leuven
Department of Economics, Leuven - miscellaneous
Mathematics, Campus Kulak Kortrijk
× corresponding author
# (joint) last author

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