Cash holdings and financing decisions under ambiguity

Agliardi, Elettra, Agliardi, Rosella and Spanjers, Willem (2014) Cash holdings and financing decisions under ambiguity. (Working Paper) Bologna, Italy : Department of Economics, University of Bologna. 22 p. (Quaderni - Working Paper DSE, no. 979)

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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.

Item Type: Monograph (Working Paper)
Research Area: Economics and econometrics
Faculty, School or Research Centre: Faculty of Arts and Social Sciences > School of Economics, History and Politics (from November 2012)
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Depositing User: Willem Spanjers
Date Deposited: 11 Dec 2014 11:58
Last Modified: 11 Dec 2014 11:58
URI: http://eprints.kingston.ac.uk/id/eprint/29707

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