Richard H. Bernhard, Risk-Adjusted Values, Timing of Uncertainty Resolution, and the Measurement of Project Worth, The Journal of Financial and Quantitative Analysis, Vol. 19, No. 1 (Mar., 1984), pp. 83-99

Geske derived in [1] expressions for the values of junior and senior debt and equity. In this paper, some confusion about these expressions is cleared up, and an error is corrected. We use the same notation as in [1].

Previous analyses of market structures characterized by gradual information dissemination presume the equilibrium price existing after all market participants are informed is independent of the order of information dissemination. In these papers, final market clearing price, given the investors' posterior beliefs, is known a priori and is assumed to equal the price that would exist if data were disseminated simultaneously. We demonstrate that final equilibrium price is dependent, in general, on the order of information dissemination. This implies that, if the dissemination sequence is stochastic, price is unknown prior to the complete dissemination of information, even if the investors' posterior beliefs given the information event are known. We derive a necessary and sufficient condition for equilibrium price to be independent of the dissemination sequence in our economy. Our analysis highlights the importance of the wealth redistribution dynamics inherent in the information dissemination process.

The impact of corporate taxes on the leverage decision in a competitive market was analyzed in [8[, [9], and the incorporation of personal taxes into the problem structure was achieved in [4], [1] and [10]. In a more recent paper, Miller [6] suggested that the impacts of both corporate and personal taxation could be studied by simultaneously analyzing the supply of and demand for securities in an overall equilibrium framework. DeAngelo and Masulis [2], [3] formalized and extended the implications of Miller's model, but found that given the U.S. tax code, an equilibrium in which positive dividends were featured was not possible over and above the relatively small dividend exclusion provision.