SME investment and financing under asymmetric information

Autor:	Hai Zhang, Yao Wang, Zhiming Zhao
Rok vydání:	2021
Předmět:	Finance HF Investment timing business.industry media_common.quotation_subject Equity (finance) Information asymmetry Swap (finance) Accounting Debt HD28 Cash flow business General Economics Econometrics and Finance media_common
Zdroj:	European Financial Management. 28:1347-1375
ISSN:	1468-036X 1354-7798
DOI:	10.1111/eufm.12342
Popis:	We consider investment timing and financing decisions for finance constraint small and medium-sized enterprises (SMEs) in a dynamic setting with asymmetric information. To effectively alleviate the borne financial constraint, SMEs finances a risky project with the help of innovative contract, equity-for-guarantee swap (EGS), within which it secures guaranteed debt at the expense of equity dilution to an outside insurer. We show that firms with high cash flow can credibly signal their type to outsider insurers using the timing of investment and offering guarantee compensation package as well. In addition, asymmetric information indeed induces high-type firms speed up investment, leads to higher guarantee costs. Our findings support that EGS not only mitigates financing constraints but also reduces investment distortion for SMEs under information asymmetry. Finally, our model generates testable implications with respect to SMEs investment and financing decisions.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::7366344b3f6831e85c6efef49cb39d81 https://doi.org/10.1111/eufm.12342 Zobrazit plný text záznamu Plný text