Product market efficiency: The bright side of myopic, uninformed, and passive external finance.
We show that introducing an external capital market with information asymmetry into a product market model reduces opportunistic substitution of sub-standard goods and encourages producers to concentrate on long-run reputation building. We test this result with a laboratory experiment. We nd that, when the problem of product market opportunism is moderate, i.e., reputation formation equilibria exist when rms raise external funds but not when they rely on internal funds, external nancing resul...Expand abstract
- Oxford Finance
- Financial Economics Working Papers
- Publication date:
- Local pid:
- Deposit date:
- Copyright date: