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Aggregate Risk and the Choice between Cash and Lines of Credit

Acharya, Viral V. - 2010

We argue that a firm's aggregate risk is a key determinant of whether it manages its future liquidity needs through cash reserves or bank lines of credit. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms with high aggregate risk find it costly to get...

Persistent link: https://www.econbiz.de/10012462534

Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis

Almeida, Heitor - 2009

We use the 2007 credit crisis to assess the effect of financial contracting on real corporate behavior. We identify heterogeneity in financial contracting at the onset of the crisis by exploring ex-ante variation in long-term debt maturity. Our empirical methodology uses an experiment-like...

Persistent link: https://www.econbiz.de/10012463659

Corporate Financial and Investment Policies when Future Financing is not Frictionless

Almeida, Heitor - 2006

Much of corporate finance is concerned with the impact of financing constraints on firms. However, the literature on … financing constraints largely ignores the intertemporal implications of those constraints; in particular, how future financing … constraints affect current investment decisions. We present a model in which future financing constraints lead firms to have a …

Persistent link: https://www.econbiz.de/10012465889

The Risk-Adjusted Cost of Financial Distress

Almeida, Heitor - 2005

In this paper we argue that risk-adjustment matters for the valuation of financial distress costs, since financial distress is more likely to happen in bad times. Systematic distress risk implies that the risk-adjusted probability of financial distress is larger than the historical probability....

Persistent link: https://www.econbiz.de/10012466991