We develop a dynamic theory of capital structure, liquidity and risk management, and payout policies for a financially … firm may be either endogenously risk-averse or risk-loving depending on the degree of market incompleteness and its current … leverage. When it is risk-averse, the firm optimally manages its risk by fully hedges its hedgeable risk so as to minimize the …

decisions of small firms, because additional financial markets signal how firms can reduce overall sector risk. Finally, we show …

extended model with an infinite horizon, idiosyncratic risk and more realistic assumptions is used to demonstrate the general …