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We model corporate liquidity policy and show that aggregate risk exposure is a key determinant of how firms choose between cash and bank credit lines. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms with high aggregate risk find it costly to get credit...
Persistent link: https://www.econbiz.de/10013102858
procyclical, allowing for greater financing when the probability of default is lower. Our theory predicts that the incidence of so …
Persistent link: https://www.econbiz.de/10012857469
We develop a model showing how investors, venture capitalists (VCs), and entrepreneurs integrate into a venture capital fund (VCF). Investors' demand for VC services will depend on their beliefs about the accuracy of VC screening and their expected revenue without a VC. The quality of screening...
Persistent link: https://www.econbiz.de/10013039042
construct of debt overhang. The empirical patterns we report fit the theory that call features limit debt overhang by …
Persistent link: https://www.econbiz.de/10012906447
Ensuring that a firm has sufficient liquidity to finance valuable projects that occur in the future is at the heart of the practice of financial management. Yet, while discussion of these issues goes back at least to Keynes (1936), a substantial literature on the ways in which firms manage...
Persistent link: https://www.econbiz.de/10010227725
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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/10013141860
"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/10003983591
Persistent link: https://www.econbiz.de/10010204676
Persistent link: https://www.econbiz.de/10009679057