The Security Design Of Firm & Information Analysis

I attemptes to discuss the security design of firm in this paper. The security design resolves in allocation of both flows and control rights across securies. The discussing is basd on two theories: The first is the theory about the interest conflicts among the different interest-related security-holders, and the second is the theory of asymmetric information.The chaper 1 discusses the birth and development of the security design of firm, and synthesizes the rescent researches about theories by predecessors. In common views, the security of firm was coming into being along the forming of shared-corprate. In order to get more funds, the enterprise issued some share-certificate and debt-certifcate, and these certiticates are securities. In the fact, these securities are contractes on base of capital-relationship. There are intense relations between security and capital structure. The theory of security design is initially about the capital structure of corprate, and explaines the allocation of both cash flows and control rights across securities. However, not only does the security design of firm include the capital structure, but also includes the internal structure and the provisions of every kinds of security. Especially the internal structure and the provisions of security exert great importance in the course of allocation of both cash flows and control rights, and it is the main content of this paper needing to dicuss based on asymmetric information approach.Chaper 2 explaines the base of the security design of firm. Along with the shared-corprate and the securites of corprate coming on, there become various interest groups with claim to the firm's resouces, including managers, shareholder, debtholder, staff and workers, and so on. And so the enterprise becomes a contract of these different groups on base of equality and freedom. Because of the modenization of means of production or production management, these interest groups must engage in much specialized investment as the cost of these activities. Since it is so, they have different interest-functions. Under these circumstances, they take action based on their interest-functions around their contract. As there is no mechanism the interest conflicts between them arise. The security design brings into play to create a machenism to have them communicated and supervised with each other.Chaper 3 explicates the design of internal structure and the provisions of equity, and its information function. There are many interest conflicts to be alleviated through design of internal structure and equity provisions. However, the typical confilic is the agencyconflict between shareholders and managers. The fundmental reason why the agency conflict arises is asymmetric information between shareholders and managers. Some interest groups such as managers who own the information about the production and opration of firms may invest less effort in managing firm resources and may be able to transfer firm resources to their own, personal benefit, e.g., by consuming "perquisites" such as firm jets, plush offices, building "empires", etc. The tranditional way to resovle this kind of conflict is designing a rational of managers, including fixed payment, changed payment and profit shareing, and so on. However, all of these remueration contracts cannot produce a best effect because of the transaction cost and the asymmetric information. The provisions of remueration contract are limited by so much factors that they cannot bring into play well. The popular promoted way to resolve the agency conflict between shareholders and managers is to design the. internal structure and equity provisions, such as manager holding some residual claim or equity option, and so on. The design of internal structure and the provisions of equity can provide a mechanism through which shareholders and managers communicate with each other, and alleviated the problom of asymmetric information.Chaper 4 analyses the design of provisions of firm bonds and its informational function. The conflict b...