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Cash Flows and Debt Maturity
Author(s) -
Goswami Gautam,
Rebello Michael,
Noe Thomas
Publication year - 1997
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00079
Subject(s) - economics , debt , pooling , term (time) , econometrics , cash flow , uniqueness , maturity (psychological) , monetary economics , macroeconomics , mathematics , finance , computer science , physics , psychology , mathematical analysis , developmental psychology , quantum mechanics , artificial intelligence
In an asymmetric information framework, a number of authors have demonstrated the existence and uniqueness of short‐term debt pooling equilibria in the absence of dissipative costs. We show that short‐term debt pooling is robust to a broad range of deviations from stationarity and intertemporal independence. However, with intertemporal dependence, separating equilibria exist in which short‐term debt signals favourable information. Non‐stationary allows for separating equilibria in which long‐term debt signals favourable information. A range of deviations from stationarity and intertemporal independence also support long‐term debt pooling equilibria.