Precautionary Saving in a Financially Constrained Firm

Autor:	Andrew B Abel, Stavros Panageas
Rok vydání:	2023
Předmět:	Economics and Econometrics Accounting Finance
Zdroj:	The Review of Financial Studies.
ISSN:	1465-7368 0893-9454
Popis:	For a firm that cannot raise external funds, cash on hand serves as precautionary saving. We derive a closed-form expression for the target level of cash on hand in the presence of persistent cash flows. Contrary to conventional wisdom, a mean-preserving increase in the volatility of cash flow can decrease this target. Over the set of admissible parameter values, the average impact of volatility on the target is zero. Endogenous selection, reflecting termination of firms that run out of cash, leads to a positive average impact of volatility on the target level of cash, consistent with empirical findings.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::dab104a81e27f8df4e83f156758aabbb https://doi.org/10.1093/rfs/hhad007 Zobrazit plný text záznamu