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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
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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
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Risk Management with Supply Contracts
Almeida, Heitor - 2017
hedging activity. Firms that expand their risk management options following the introduction of steel futures contracts … substitute financial hedging for purchase obligations. Contracting frictions - such as bargaining power and settlement risk - as …
Persistent link: https://www.econbiz.de/10012455350
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Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies
Acharya, Viral V. - 2005
firms will allocate excess cash flows into cash holdings if their hedging needs are high (i.e., if the correlation between … current debt if their hedging needs are low. The empirical examination of cash and debt policies of a large sample of … financially constrained firms with high hedging needs have a strong propensity to save cash out of cash flows, while showing no …
Persistent link: https://www.econbiz.de/10012467291