TY  - JOUR
AU  - Myers,Stewart C.
AU  - Majluf,Nicholas S.
TI  - Stock Issues and Investment Policy When Firms Have Information That Investors Do Not Have
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 884
PY  - 1982
Y2  - April 1982
UR  - http://www.nber.org/papers/w0884
L1  - http://www.nber.org/papers/w0884.pdf
N1  - Author contact info:
Stewart C. Myers
Massachusetts Institute of Technology
Sloan School of Management
E62-620
77 Massachusetts Avenue
Cambridge, MA 02142
Tel: 617/253-6696
Fax: 617/258-6855
E-Mail: scmyers@mit.edu

Nicholas S. Majluf
AB  - This paper describes corporate investment and financing decisions when managers have inside information about the value of the firm's existing investment and growth opportunities, but cannot convey that information to investors. Capital markets are otherwise perfect and efficient. In these circumstances, the firm may forego a valuable investment opportunity rather than issue stock to finance it. The decision to issue cannot fully convey the managers' special information. If stock is issued, stock price falls. Liquid assets or financial slack are valuable if they reduce the probability or extent of stock issues. The paper also suggests explanations for some aspects of dividend policy and choice of capital structure.
ER  -