Essays in Financial Economics

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dc.contributor.advisorBack, Kerryen_US
dc.creatorBarton, Paulen_US
dc.date.accessioned2019-07-19T13:46:38Zen_US
dc.date.available2019-07-19T13:46:38Zen_US
dc.date.created2019-08en_US
dc.date.issued2019-07-19en_US
dc.date.submittedAugust 2019en_US
dc.date.updated2019-07-19T13:46:39Zen_US
dc.description.abstractFinancial markets often feature interactions between agents who do not have the same amount of information about a financial asset. The presence of asymmetric information in financial market interactions has significant implications for equilibrium outcomes, and can account for the behavior observed in certain empirical puzzles. In the first chapter, I study the formation of a firm’s capital structure. I show that asymmetric information between firms and investors causes firms to signal their quality to the market via their debt issuance decisions. In contrast to the previous literature, I show that this setting can result in high quality firms borrowing less than low quality firms. An effect similar to that of credit rationing drives this result. This finding can explain the zero leverage puzzle, i.e. some high quality firms use almost no leverage; as well as the negative correlation between profitability and leverage and findings of no (or negative) announcement effects for debt issuance. In the second chapter, I construct a model of informed trading through a public exchange and a dark pool, where the informed trader has price impact. In this model, the dark pool makes the price less accurate by reducing the quantity of public exchange trading from the informed agent. This reduction in trade is due to the fact that the informed agent can profit from the dark pool, but only if he does not make the price on the public exchange too accurate. In the third chapter, which is co-authored with Kerry Back, we examine the case of traders with differing private values for an asset such that there are gains to trade. We show that if traders are unwilling to display liquidity due to the information revealed by orders, then an opportunity to trade in the dark can be welfare enhancing. We introduce a dark mechanism into a model of two-sided bargaining with incomplete information and strategic delay. Traders delay displaying liquidity even further when it is possible to trade in the dark, but the net effect of trading in the dark is to accelerate trade and increase welfare.en_US
dc.format.mimetypeapplication/pdfen_US
dc.identifier.citationBarton, Paul. "Essays in Financial Economics." (2019) Diss., Rice University. <a href="https://hdl.handle.net/1911/106159">https://hdl.handle.net/1911/106159</a>.en_US
dc.identifier.urihttps://hdl.handle.net/1911/106159en_US
dc.language.isoengen_US
dc.rightsCopyright is held by the author, unless otherwise indicated. Permission to reuse, publish, or reproduce the work beyond the bounds of fair use or other exemptions to copyright law must be obtained from the copyright holder.en_US
dc.subjectcorporate financeen_US
dc.subjectmarket microstructureen_US
dc.subjectasymmetric informationen_US
dc.titleEssays in Financial Economicsen_US
dc.typeThesisen_US
dc.type.materialTexten_US
thesis.degree.departmentEconomicsen_US
thesis.degree.disciplineSocial Sciencesen_US
thesis.degree.grantorRice Universityen_US
thesis.degree.levelDoctoralen_US
thesis.degree.nameDoctor of Philosophyen_US
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