Cash holdings and financing decisions under ambiguity

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Quaderni - Working Paper DSE ; No. 979

Classification and Topics

• Classification: Wirtschaft ; Corporate Finance and Governance: General ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Microeconomic Behavior: Underlying Principles ; Criteria for Decision-Making under Risk and Uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Agliardi, Elettra ; Agliardi, Rossella ; Spanjers, Willem
• Event: Veröffentlichung
• (who): Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
• (where): Bologna
• (when): 2014

Further information

• DOI: doi:10.6092/unibo/amsacta/4111
• Handle: http://hdl.handle.net/10419/159817
• Last update: 10.03.2025, 11:43 AM CET