An expanded information barrier on private finance for defence companies in both developed and emerging markets

Today, the defense industry is still supported by the state mechanism, and especially the defense industry enterprises face difficulties in accessing financial resources. At this point, in addition to the state financing of defense industry enterprises, their access to financing sources has also gained importance. In addition to the situation presented by the Information Barrier Model in the literature, where defense industry enterprises are financed by the government in the form of cost-plus or by banks through bank loans, this study considers a structure in which investors also finance enterprises. In this framework, the Information Barrier Model has been extended to include the strategies of investors, banks, and companies, and the model has been reinterpreted by classifying companies as experienced or inexperienced to include defense companies in developing countries rather than the high-low risk classification of companies in developed countries. The results suggest that policymakers can direct the financing of the defense industry between banks and potential investors by acting in a risk-return context.