Adverse Selection and Risk Aversion in Capital Markets

摘要: We generalize the Boadway and Keen (2006) model of adverse selection in capital markets to allow for risk aversion on part entrepreneurs. use this analyze two types if policies. Wefirst consider policies that would entrepreneurs a greater fraction their total wealth financing projects, thus allowing them reduce reliance debt or equity finance by outside investors. show such may not be welfare improving because it exposes more down-side risk. This result highlights importance risk-aversion since aim at alleviating inefficiencies associated with increase exposure ultimately welfare. We, then, how tax treatment losses affects social society places high value distributional are sufficiently averse, full-loss offset system desirable even when there is excessive investment. Keywords: Adverse selection, debt, equity, policy. JEL codes: H20, G14.