We develop a model that endogenizes dynamic financing, investment, and cash retention/payout policies in order to analyze the effect of financial flexibility on firm value. We show that the value of financing flexibility depends on the costs of external financing, the level of corporate and...

We develop a dynamic structural model of the firm that allows us to carefully analyze the value of alternative financing strategies. We first illustrate the benefits of joint versus separate optimization of dynamic financing and investment policies. We then examine the impact on firm value of...

We examine the effectiveness of debt covenants in alleviating financial agency problems. Distortions in both investment and financing policies with long--term debt are captured in a structural dynamic model where both policies are endogenously determined by shareholders. The combined and...

We analyze the value created by a dynamic integrated risk management strategy involving liquidity management, derivatives hedging and operating flexibility, in the presence of several frictions. We show that liquidity serves a critical and distinct role in risk management, justifying high levels...