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Finance mechanisms for the new industry growth

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Frame of Image ely low information about the company.
In financial transactions, the adverse selection and moral hazard problems due to the information asymmetry cause the market failure that the supply of funds takes place under the optimal level of funds. Market failure due to the information asymmetry is a common phenomenon seen in the financial markets. Moreover, if the company belongs to the new industry sectors and is in initial stage of technical development, the information asymmetry problem is likely to occur more seriously. Second, Uncertainty is relatively large. Financial institutions are experts in risk assessment and management. But they tend to avoid uncertainty. Here risk means that an undesirable situation that is possible to take place. However, uncertainty means that what would happen is not possible to predict. Main difference between the two concepts is that assessing the risk is possible in advance but predicting the uncertainty is not. There are a lot of uncertain factors in the process of technology development that can’t be evaluated and managed in the financial markets. It is hard to predict the success of technology development itself. Even though this technology is successfully developed and commercialized, sustainable profits are made
when market demand is secured. In this case it is more difficult job to evaluate the uncertain situation of market that affects the potential market demand. As a matter of fact, risk management of financial institutions is one of t


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Title Finance mechanisms for the new industry growth
Similar Titles
Material Type Reports
Author(English)

Kim, Soo-Dong

Publisher

[Seoul]:Korea Institute for Industrial Economics & Trade

Date 2011
Journal Title; Vol./Issue KIET Industrial Economic Review:vol. 16(no. 2)
Pages 12
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding KDI School of Public Policy and Management

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