This paper derives conditions under which the well-known decomposition of unconditional expected utility into marginal probabilities and conditional expected utility generalizes to Cumulative Prospect Theory, as well as updating rules for probability weighting functions. The results are, for...

We analyze the relation between firms' exposure to exogenous business risk and their financing choices, based on a sample of firms for which we can measure such exposure. The results show that firms more exposed to exogenous risk use less debt financing. We also analyze the relation between the...

We analyze the relation between firms' exposure to exogenous business risk and their financing choices, based on a sample of firms for which we can measure such exposure. The results show that firms more exposed to exogenous risk use less debt financing. We also analyze the relation between the...