Liquidity shocks and firm''s investment decisions under information asymmerty

• Main Authors: Luo, Yu-Ting, 羅玉婷
• Other Authors: Chyi-Mei Chen, Yehning Chen
• Format: Others
• Language: zh-TW
• Published: 1997
• Online Access: http://ndltd.ncl.edu.tw/handle/65834491140988056290

碩士 === 國立臺灣大學 === 財務金融學系 === 85 === In this thesis I develop a signaling model to analyze a firm'' s investment decision when management has private information that investors do not know. The model extends Myers and Majluf ( 1984 ) by considering more types of information asymmetries. In addition to the net present value of the investmentproject and the value of the firm''s asset-in-place , the probability of aliquidity shock, which is the probability that manager has to sell his sharesbefore the value of the firm is realized, is also considered as the manager''sprivate information.Several interesting results follow. First, if manager posseses private information about the value of the firm''s asset-in-place and the probability of a liquidity shock,then as in Myers and Majluf the manager may forsake valuable investment projects.Moreover, the extent ofunderinvestment in this case is even more serious than that in Myers and Majluf.Second, if the manager''s private information is about the net presentvalue of the investment opportunity and the probability of a liquidity shock,then both overinvestment and underinvestment are possible. Finally, when theprobabaility of a liquidity shock is the manager''s private information ,stockprices may fall when the liquidity shock occurs even if the manager can provethat the sale of shares does not have information contents.