Equity Markets and Economic Development: What Do We Know



As shown in Figure 1, the highest of the curves is the locus corresponding toα = 1 , and the
lowest is the locus corresponding to
α= 0 . Inspection of the figure shows that the proportions
of firms which prefer one contract to the other change with the level of information
transparency. The fact that the proportion of firms preferring equity to debt is more important
for high levels of information asymetries is due to the construction of the asymetry
variable
Zt . More interestingly, the figure shows that the number of equity contracts increases
with informational transparency, as we move from
Z0 to Z1 . This model thus highlights that
informational dynamics play a central role in determining the contribution of equity markets
to the financing of investment project. This also suggests that equity markets can be useful,
but constitute be poor guides to investors in the presence of information asymmetries.



More intriguing information

1. The name is absent
2. Bargaining Power and Equilibrium Consumption
3. How we might be able to understand the brain
4. The Impact of Optimal Tariffs and Taxes on Agglomeration
5. WP 36 - Women's Preferences or Delineated Policies? The development or part-time work in the Netherlands, Germany and the United Kingdom
6. Whatever happened to competition in space agency procurement? The case of NASA
7. The name is absent
8. The Role of Evidence in Establishing Trust in Repositories
9. The name is absent
10. Pricing American-style Derivatives under the Heston Model Dynamics: A Fast Fourier Transformation in the Geske–Johnson Scheme