Moral Hazard and Adverse Selection: The Question of Financial Structure
研究企业家在向竞争性金融市场发行证券时面临的道德风险和逆向选择问题，分析债务和股权联合使用如何影响资本结构与不可观测特征之间的均衡关系。
ABSTRACT This paper looks at the moral hazard and adverse selection problems confronting an entrepreneur offering securities to an uninformed, but competitive financial market. The adverse selection aspect of the problem is generated by the unobservable entrepreneur's ability to transform effort into value. Moral hazard arises because the investment decision is made subsequent to financing. We consider the joint use of both debt and equity, and characterize the equilibrium relation between capital structure and unobservable attributes. It is shown that: (1) investment and financing are not separable; (2) there is an underinvestment problem for “better” firms; and (3) simultaneous use of both debt and equity can resolve this difficulty. We also establish a connection between expected terminal firm value and debt‐promised payment level and between share retention and standard deviation.