Selling assets to raise corporate capital
Alex Edmans, William Mann 15 February 2014
All firms need capital. Much research addresses the choice between issuing various types of securities – for example, between issuing debt and equity. However, another method of financing has received relatively little attention – selling non-core assets, such as property, divisions, or financial investments. This article explains the conditions under which an asset sale is the preferred means of raising capital, and highlights how a manager should go about deciding between selling assets and issuing securities.
Asset sales are a means of financing
Financial markets Frontiers of economic research
asymmetric information, capital, adverse selection, information asymmetry, lemons problem, asset sales, financing
Information asymmetry raises the cost of capital for corporations
James Choi, Hongjun Yan 25 January 2013
Security-market regulations often seek to ensure that all investors have equal access to information about each company. But what are the actual costs of an unequal information playing field? This column reviews evidence from China, Finland, and the US, suggesting that information asymmetry raises companies’ cost of capital. This inhibits investment and thereby long-run economic growth.
Governments around the world try to level the information playing field among investors by regulating the disclosure of corporate information. But what is the cost of unequal access to information? In this column, we review evidence from the three most recent papers in this area.
Frontiers of economic research International finance
Finance, information asymmetry