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How Risky is your Project Really? Corporate Finance Strategies for Assessing Risk
Burgess, Nicholas - 2021
Risk is a vital concept to grasp when investing in a firm or project. It is also a key ingredient required to evaluate the cost of capital and perform a valuation. An organization’s capital structure, specifically the amount of leverage and debt financing employed, must be accounted for to...
Persistent link: https://www.econbiz.de/10013234781
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Coinvestment and risk taking in private equity funds
Bienz, Carsten; Thorburn, Karin; Walz, Uwe - 2016
Private equity fund managers are typically required to invest their own money alongside the fund. We examine how this coinvestment affects the acquisition strategy of leveraged buyout funds. In a simple model, where the investment and capital structure decisions are made simultaneously, we show...
Persistent link: https://www.econbiz.de/10011436066
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Managerial Incentives and IPO Failure Risk
Colak, Gonul - 2019
IPO firms with high-powered CEO incentive contracts have lower failure rates in the aftermarket. Economically, an interquartile change in the distribution of CEO pay translates in a reduction of the failure risk probability by approximately 21%. The Pay Gap between the CEO and its subordinate...
Persistent link: https://www.econbiz.de/10012898102
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Policy Uncertainty and Cash Dynamics
Tut, Daniel - 2019
paper, we postulate and provide evidence that policy uncertainty induces financing frictions and adjustment costs which … decelerate the speed of adjustment (SOA) of cash toward target. We also find that the effects of policy uncertainty on SOA are … the face of policy uncertainty shocks, firms optimally deviate from target cash as the expected benefit of deviation is …
Persistent link: https://www.econbiz.de/10012868504
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Discount Rate Uncertainty and Capital Investment
Bessembinder, Hendrik; H. Décaire, Paul - 2021
discount rate uncertainty is associated with increased firm investment of 6.8%, while profitability decreases by 4.1% …
Persistent link: https://www.econbiz.de/10013251697
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Operational Risk and Market Risk as Determinants of Working Capital
Madhou, Ashwin - 2013
We propose a new approach that reconciles traditional working capital management with risk management principles. By extending the traditional working capital approach, we develop a risk-adjusted working capital model. We examine the determinants of working capital for Australian firms over the...
Persistent link: https://www.econbiz.de/10013078423
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Capital Budgeting and Idiosyncratic Risk
H. Décaire, Paul - 2020
Using an NPV-based revealed-preference strategy, I find that idiosyncratic risk materially affects the discount rate that firms use in their capital budgeting decisions. I exploit quasi-exogenous within-region variation in project-specific idiosyncratic risk and find that, on average, firms...
Persistent link: https://www.econbiz.de/10012846966
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Tournament Incentives, Firm Risk, and Corporate Policies
Kini, Omesh - 2011
This paper tests the proposition that higher tournament incentives will result in greater risk taking by senior managers in order to increase their chance of promotion to the rank of CEO. Measuring tournament incentives as the pay gap between the CEO and the next layer of senior managers, we...
Persistent link: https://www.econbiz.de/10013133806
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A Model of Industry Tournament Incentives
Coles, Jeffrey L. - 2020
This paper builds on Rosen (1981) and Hvide (2002) to provide a simple framework that elucidates the nature of incentives in the tournaments among top executives in both the external managerial labor market for the top executive positions in other companies and within the executives' own firm...
Persistent link: https://www.econbiz.de/10012842651
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Uncertainty and the Value of Cash Holdings
Im, Hyun Joong - 2017
We find that a firm facing higher uncertainty has a higher value of cash. This effect is attributed to the increased …
Persistent link: https://www.econbiz.de/10012962206