Investments and capital market imperfections, identification issues: a survey

If financial markets are perfect, the choice of the sources of finance does not influence investment decisions. However, financial markets are considered to be far from perfect. This review concentrates on the role of information asymmetry in determining real investment decisions. Despite the theore...

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Bibliographic Details
Published inFinancial theory and practice Vol. 34; no. 4; pp. 407 - 436
Main Author Coric, Bruno
Format Journal Article
LanguageEnglish
Published Institut za javne financije 01.12.2010
Institute of Public Finance
Subjects
Asymmetric information
Capital market
capital markets imperfections
Data analysis
Economic theory
Financial economics
Investment
Methodology
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Summary:If financial markets are perfect, the choice of the sources of finance does not influence investment decisions. However, financial markets are considered to be far from perfect. This review concentrates on the role of information asymmetry in determining real investment decisions. Despite the theoretical plausibility of a relationship between capital market imperfections and real investments, the empirical literature has found it difficult to identify this channel. Overall, more research is needed to identify a method that will not be subject to criticisms related to the use of cash-flow in the investment equation and will be based on the data that are relatively available across countries and over time.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
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ISSN:1846-887X
1845-9757