SFB 303 Discussion Paper No. A - 262
Author: Detemple, J., P. Gottardi, and H. M. Polemarchakis
Title: The Relevance of Financial Policy
Abstract: When the asset market is incomplete, equilibrium allocations are not
invariant to changes in the financial policies of firms: in the presence of
secondary assets, such as options, whose payoffs depend nonlinearly on the
price of equity, the range of attainable reallocations of revenue varies as
a firm alters its position in the asset market. Corporate financial policy
is thus relevant. When assets are nominal, monetary policy implemented
through open market operations is effective.
Creation-Date: August 1989
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