This paper addresses the following unresolved questions: Why do some firms issue equity instead of debt? Why did most firms retain their cash holdings instead of distributing them as dividends in recent times? How do firms change their financing policies during a period of severe financial constraints and ambiguity, or when facing the threat of an unpredictable financial crisis? We analyze how the values of the firm’s equity and debt are affected by ambiguity. We also show that cash holdings are retained longer if the investors’ ambiguity aversion bias is sufficiently large, while cash holdings become less attractive when the combined impact of ambiguity and ambiguity aversion is relatively low.

Agliardi Elettra, Rossella Agliardi, Willem Spanjers (2014). Corporate financing decisions under ambiguity. Bologna : Alma Mater Studiorum - Dipartimento di Scienze Economiche.

Corporate financing decisions under ambiguity

AGLIARDI, ELETTRA;AGLIARDI, ROSSELLA;
2014

Abstract

This paper addresses the following unresolved questions: Why do some firms issue equity instead of debt? Why did most firms retain their cash holdings instead of distributing them as dividends in recent times? How do firms change their financing policies during a period of severe financial constraints and ambiguity, or when facing the threat of an unpredictable financial crisis? We analyze how the values of the firm’s equity and debt are affected by ambiguity. We also show that cash holdings are retained longer if the investors’ ambiguity aversion bias is sufficiently large, while cash holdings become less attractive when the combined impact of ambiguity and ambiguity aversion is relatively low.
2014
20
Agliardi Elettra, Rossella Agliardi, Willem Spanjers (2014). Corporate financing decisions under ambiguity. Bologna : Alma Mater Studiorum - Dipartimento di Scienze Economiche.
Agliardi Elettra; Rossella Agliardi; Willem Spanjers
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/382713
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