Working Paper: NBER ID: w8641
Authors: Sheridan Titman
Abstract: Most of the recent literature on risk management and capital structure assumes that markets are perfect, i.e., efficient and complete. This paper presents anecdotal evidence that suggests that different capital markets (e.g., debt, equity and warrants markets) may not be perfectly integrated, and discusses the implications of this lack of integration on financing strategies. I argue that although models that assume perfect markets are sufficient to explain cross-sectional differences in financing and risk management choices within an economy, that issues relating to market conditions may be necessary to explain differences in these choices across countries and across time.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Lack of integration among capital markets (G19) | Different financing choices (G51) |
| Market conditions (D49) | Corporate financing strategies (G32) |
| Market integration (F15) | Necessity for corporations to adapt financing strategies (G32) |
| Deviations from perfect markets (D43) | Financing patterns (G32) |