TY  - JOUR
AU  - Myers,Stewart C.
AU  - Majluf,Nicholas S.
TI  - Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1396
PY  - 1984
Y2  - July 1984
UR  - http://www.nber.org/papers/w1396
L1  - http://www.nber.org/papers/w1396.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 considers a firm that must issue common stock to raise cash to undertake a valuable investment opportunity. Management is assumed to know more about the firm's value than potential investors. Investors interpret the firm's actions rationally. An equilibrium model of the issue-invest decision is developed under these assumptions.The model shows that firms may refuse to issue stock, and therefore may pass up valuable investment opportunities.The model suggests explanations for several aspects of corporate financing behavior, including the tendency to rely on internal sources of funds, and to prefer debt to equity if external financing is required. Extensions and applications of the model are discussed.
ER  -