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The firm under uncertainty : capital structure and background risk
Broll, Udo; Wong, Keith K.P. - 2010
uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm … always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk …. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences …
Persistent link: https://www.econbiz.de/10003971039
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Prospect theory and hedging risks
Broll, Udo; Egozcue, Martín; Wong, Wing Keung; … - 2010
The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in mathematical challenges: simple extensions and...
Persistent link: https://www.econbiz.de/10003980000
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Prospect theory and two moment model: the firm under price uncertainty
Broll, Udo; Egozcue, Martin; Wong, Wing Keung - 2009
Within the prospect theory the paper examines production and hedging decisions of a competitive firm under price uncertainty. We consider the prospect theory for the firm's utility function in the two moment model known as (mu,sigma)-preference. In contrast to the literature our findings show...
Persistent link: https://www.econbiz.de/10003841926
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Hedging and the regret theory of the competitive firm
Broll, Udo; Welzel, Peter; Wong, Kit Pong - 2019
is not only risk averse but also regret averse. Regret-averse preferences are characterized by a modified utility … firm optimally increases (decreases) its futures position when the price risk possesses more positive (negative) skewness. …
Persistent link: https://www.econbiz.de/10012112834
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Capital structure and the firm under uncertainty
Broll, Udo (contributor); Wong, Kit Pong (contributor) - 2003
. Besides output price uncertainty, the firm faces additional sources of risk which are aggregated into an additive background … risk. We show that the firm always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital …, irrespective of the risk attitude of the firm and the incidence of the multiple sources of uncertainty. Even though the …
Persistent link: https://www.econbiz.de/10001926063
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The firm under uncertainty: capital structure and background risk
Broll, Udo; Wong, Keith K.P. - 2010
uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm … always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk …. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences …
Persistent link: https://www.econbiz.de/10010301363
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Uncertainty, Investment Spikes, and Leverage Adjustments
Im, Hyun Joong - 2020
We study the effects of uncertainty on corporate leverage adjustments with respect to investment spikes and find that overlevered and underlevered firms behave very differently in response to the combination of uncertainty and investment spikes. Overlevered firms facing high uncertainty converge...
Persistent link: https://www.econbiz.de/10012855716
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Theory of the Firm Under Uncertainty : Financing, Attitude to Risk and Output Behavior
Bauer, Michal - 2007
The paper examines the risk behavior of a competitive firm under price uncertainty. In the model developed in the paper … we have departed from the thought-provoking approach of Greenwald and Stiglitz (1993a), which implies solely risk averse … risk averse vs. risky manner. While the firm's attitude to risk directly influences its willingness to produce, our results …
Persistent link: https://www.econbiz.de/10014051329
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Uncertainty and Exit Decisions : Evidence from Plant-Level Data
Carvalho, Daniel R. - 2018
Theory suggests that uncertainty can play an important role in determining firms' decisions to shut down operations. In this paper, I provide evidence that input-price uncertainty leads to significant and persistent reductions in plant exits in the context of Brazilian manufacturing. I analyze...
Persistent link: https://www.econbiz.de/10012936858
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The firm under uncertainty : real and financial decisions
Broll, Udo; Kit, Pong Wong - In: Decisions in economics and finance : DEF ; a journal of … 36 (2013) 2, pp. 125-136
Persistent link: https://www.econbiz.de/10010195624