Anderson, Ronald W. and Carverhill, Andrew (2011) Corporate liquidity and capital structure. Review of Financial Studies, 25 (3). pp. 797-837. ISSN 0893-9454
Full text not available from this repository.Abstract
We solve for a firm's optimal cash holding policy within a continuous time, contingent claims framework using dividends, short-term borrowing, and equity issues as controls assuming mean reversion of earnings. Optimal cash is non-monotone in business conditions and increasing in the level of long-term debt. The model matches closely a wide range of empirical benchmarks and predicts cash and leverage dynamics in line with the empirical literature. Firm value is quite insensitive to changes in the level of long-term debt. The model has interesting implications for asset substitution, hedging, and pecking order. Growth opportunities do not greatly affect cash holding policy.
| Item Type: | Article |
|---|---|
| Official URL: | http://rfs.oxfordjournals.org/ |
| Additional Information: | © 2011 Oxford University Press |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure G - Financial Economics > G3 - Corporate Finance and Governance > G35 - Payout Policy |
| Date Deposited: | 18 Jan 2012 15:29 |
| Last Modified: | 18 Sep 2024 01:54 |
| URI: | http://eprints.lse.ac.uk/id/eprint/37351 |
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