Security token offerings versus loan guarantees for risk-averse entrepreneurs under asymmetric information
We compare two competitive financing schemes, loan guarantees and security token offerings (STOs), for a risk-averse entrepreneur to start a project. We show that, if information is symmetric, STOs are better than loan guarantees. Under asymmetric information, we derive the highest equity price that makes low-type entrepreneurs’ imitation unprofitable. If the project risk is sufficiently high, loan guarantees (STOs) induce pooling (separating) equilibrium, and otherwise the opposite holds. Generally the higher the project risk, the less the share of equity retained by entrepreneurs and the less the project value. STOs might make project value increase with project risk. In the view of high-type entrepreneurs, if project risk is not very high or entrepreneurs do not dislike risk too much, loan guarantees are better than STOs, and otherwise the opposite holds true.
National Natural Science Foundation of China;
|WOS Research Area|
Business & Economics
|WOS Accession No|
Cited Times [WOS]:0
|Document Type||Journal Article|
|Department||Department of Finance|
1.China Academy of Financial Research,Zhejiang University of Finance and Economics,Hangzhou,310018,China
2.Department of Finance,Southern University of Science and Technology,Shenzhen,518055,China
|First Author Affilication||Department of Finance|
|Corresponding Author Affilication||Department of Finance|
Liu，Xiang,Yang，Zhaojun. Security token offerings versus loan guarantees for risk-averse entrepreneurs under asymmetric information[J]. Finance Research Letters,2023,57.
Liu，Xiang,&Yang，Zhaojun.(2023).Security token offerings versus loan guarantees for risk-averse entrepreneurs under asymmetric information.Finance Research Letters,57.
Liu，Xiang,et al."Security token offerings versus loan guarantees for risk-averse entrepreneurs under asymmetric information".Finance Research Letters 57(2023).
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