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Bolton, Patrick - 2014

We analyze a model of optimal capital structure and liquidity choice based on a dynamic tradeoff theory for financially constrained firms. In addition to the classical tradeoff between the expected tax advantages of debt and bankruptcy costs, we introduce a cost of external financing for the...

Persistent link: https://www.econbiz.de/10013056204

Levered Returns

Welch, Ivo - 2016

Do financial markets properly reflect leverage? Unlike Gomes and Schmid (2010) who examine this question with a structural approach (using long-term monthly stock characteristics), my paper examines it with a quasi-experimental approach (using short-term a discrete event). After a firm has...

Persistent link: https://www.econbiz.de/10012994892

Predictability of Returns and Cash Flows

Koijen, Ralph S. J. - 2010

We review the literature on return and cash flow growth predictability form the perspective of the present-value identity. We focus predominantly on recent work. Our emphasis is on U.S. aggregate stock return predictability, but we also discuss evidence from other asset classes and countries

Persistent link: https://www.econbiz.de/10013134792

The Analytics of Investment, Q, and Cash Flow

Abel, Andrew B. - 2015

operating profit of capital, I extend the model to include measurement error and analyze the cash-flow coefficient in … regressions of investment on q and cash flow. In empirical studies, the estimated cash-flow coefficient is generally positive and … derive closed-form expressions for the cash-flow coefficient that are positive and larger for faster growing firms, yet there …

Persistent link: https://www.econbiz.de/10013015553

Profitable Investments or Dissipated Cash? Evidence on the Investment-Cash Flow Relationship from Oil and Gas Lease Bidding

Bertrand, Marianne - 2005

The strong positive relationship between corporate cash flow and investment has been interpreted through the lens of both agency- and non-agency-based models. In this paper, we distinguish between these two interpretations using project-level data in the oil and gas industry. The specific...

Persistent link: https://www.econbiz.de/10012784938

Investment-Cash Flow Sensitivities are Not Valid Measures of Financing Constraints

Kaplan, Steven N. - 2001

Kaplan and Zingales [1997] provide both theoretical arguments and empirical evidence that investment-cash flow sensitivities are not good indicators of financing constraints. Fazzari, Hubbard and Petersen [1999] criticize those findings. In this note, we explain how the Fazzari et al. [1999]...

Persistent link: https://www.econbiz.de/10012788101

Leverage Dynamics Without Commitment

DeMarzo, Peter M. - 2016

We analyze equilibrium leverage dynamics in a dynamic tradeoff model when the firm is unable to commit to a leverage policy ex ante. We develop a methodology to characterize equilibrium equity and debt prices in a general jump-diffusion framework, and apply our approach to the standard Leland...

Persistent link: https://www.econbiz.de/10012979368

The Valuation of Cash Flow Forecasts : An Empirical Analysis

Kaplan, Steven N.; Ruback, Richard S. - 2021

This paper compares the market value of highly leveraged transactions (HLTs) to the discounted value of their corresponding cash flow forecasts. These forecasts are provided by management to investors and shareholders in 51 HLTs completed between 1983 and 1989. Our estimates of discounted cash...

Persistent link: https://www.econbiz.de/10013313241