MICRO THEORY: Professor Anne-Katrin Roesler (University of Toronto)
Informational Foundations of Common Equity
We provide foundations for the use of common equity for liquidity risk sharing under asymmetric information. The firm founder raises financing from investors who suffer from liquidity shocks and may need to sell their securities prematurely to uninformed liquidity suppliers. The founder designs both securities and information about firm prospects to be disclosed to insiders or to outside investors. We show that under both modes of information design, common equity is optimal for liquidity risk sharing. Two features make it optimal: higher informational sensitivity and symmetry (up to scaling) of securities held by different investors.
Date
Tuesday, 20 October 2026
Time
12pm to 1pm
Venue
In person Seminar
AS2 05-10
AS2 05-10