Raising Capital from Heterogeneous Investors

Speaker
Ilan Kremer
Date
06/03/2018 - 13:00 - 11:30Add To Calendar 2018-03-06 11:30:00 2018-03-06 13:00:00 Raising Capital from Heterogeneous Investors A firm raises capital from heterogeneous investors to fund a project. The project is implemented only if the total capital raised exceeds an initially unknown threshold, and the firm offers payments depending on project implementation. We study the firm’s optimal self-financing scheme that maximizes its payoff subject to all investors participating being the unique equilibrium outcome. The optimal scheme features full collateral: if the project is not implemented, each investor is refunded her capital. Under implementation, however, net returns differ across investors. If the distribution of the investment threshold is log-concave, the firm offers higher returns to larger investors. Moreover, higher dispersion in investor size raises the firm’s payoff. Joint with Marina Halac and Eyal Winter. Economics building (504), faculty lounge on the first floor אוניברסיטת בר-אילן - המחלקה לכלכלה Economics.Dept@mail.biu.ac.il Asia/Jerusalem public
Place
Economics building (504), faculty lounge on the first floor
Affiliation
Hebrew University and Warwick
Abstract

A firm raises capital from heterogeneous investors to fund a project. The project is implemented only if the total capital raised exceeds an initially unknown threshold, and the firm offers payments depending on project implementation. We study the firm’s optimal self-financing scheme that maximizes its payoff subject to all investors participating being the unique equilibrium outcome. The optimal scheme features full collateral: if the project is not implemented, each investor is refunded her capital. Under implementation, however, net returns differ across investors. If the distribution of the investment threshold is log-concave, the firm offers higher returns to larger investors. Moreover, higher dispersion in investor size raises the firm’s payoff.

Joint with Marina Halac and Eyal Winter.

תאריך עדכון אחרון : 22/02/2018