We extend the continuous Cumulative Prospect Theory (CPT) by considering piecewise con-tinuous distributions with a finite number of jump discontinuities. Such distributions are rele-vant in practice, for example, within the framework of financial engineering since cash flow distributions of...

Equity research analysts tend to cover firms about which they have favorable views. We exploit this tendency to infer analysts' preferences for corporate policies from their coverage decisions. We then use exogenous analyst disappearances to examine the effect of these preferences on corporate...

We model the financing, cash holdings, and hedging policies of a firm facing financing frictions and subject to permanent and transitory cash flow shocks. We show that permanent and transitory shocks generate distinct, sometimes opposite, effects on corporate policies and use the model to...

The current paper analyzes the impacts of privatization of Sudan air carrier, Sudan Airways. The hypothetical framework in this study is that alternative policies other than privatization are feasible. Sudan airways represents the sovereignty of the country carrying its flag, its objectives is...

Much of financial theory and practice is built on the presumption that markets are liquid. In a liquid market, you should be able to buy or sell any asset, in any quantity, at the prevailing market price and with no transactions costs. Using that definition, no asset is completely liquid and...

Cash holdings as a proportion of total assets of North American corporations have roughly doubled between 1971 and 2006. Prior research attributes the large cash increase to a rise in firms' cash flow volatility. We investigate two mechanisms by which increased volatility can lead to higher cash...

Threshold events are discrete events triggered when an observable continuous variable passes a known threshold. We demonstrate how to use threshold events as identification strategies by revisiting the evidence in Rauh (2006) that mandatory pension contributions cause investment declines. Rauh's...

This article is based on the keynote address from the Eastern Finance Association meeting in South Beach in April 2010. In this keynote address, I discuss how to engage and motivate students by using the results from surveys of corporate finance professionals. Specific examples are given to...

This Article reports results of an empirical study that suggests that the current economic crisis has changed managerial behavior in the US in a way that may impede economic recovery. The study finds a strong, statistically significant and economically meaningful, positive correlation between...

We question a deep-ingrained doctrine in asset pricing: if an empirical characteristic-return relation is consistent with investor “rationality,” the relation must be “explained” by a risk factor model. The investment approach changes the big picture of asset pricing. Factors formed on...