A classic theory of corporate governance holds that, when cash flow is high and investment opportunities scarce, takeover threats reduce managerial self dealing and encourage dividend payment to owners. We conduct laboratory experiments studying the effect of cash flow on self dealing and the effect of takeover threats on both agency problems and the optimality of management of cash flows. We f...

In order to obtain SEO (Secondary Equity Offering) qualification, china listed companies would do different levels of earnings management centering on accounting earnings indicators. While previous researches on earnings management are mainly focused on enterprise management authorities’ accruals manipulation. In fact, in order to avoid losses, the user of statements would pay more attention to...

Cash forecasting plays a vital role in any financial organization to maintain the optimal cash balance to satisfy the customer needs on a daily basis without any delay. In the traditional approach statistical methods were used for cash forecasting. Banks have great challenges to avoid the surplus cash as well as to keep adequate cash to meet the customer demand. An intelligent model is needed t...

In this short note we prove a conjecture posed in Cui et al. (2012): Dynamic mean-variance problems in arbitrage-free, complete financial markets do not allow free cash flows. Moreover, we show by investigating a benchmark problem that this effect is due to the performance criterion and not due to the time inconsistency of the strategy.

In capital budgeting problems future cash–flows are discounted using the expected one period returns of the investment. In this paper we establish a theory that relates this approach to the assumption that markets are free of arbitrage. Our goal is to uncover implicit assumptions on the set of cash–flow distributions that are suitable for the capital budgeting method. As results we obtain that ...

This paper addresses student confusion over the calculation of the key valuation measure of free cash flow. Confusion is shown to arise from the measure used to represent capital expenditures and from the treatment of depreciation expense. Even for students who have had a full complement of undergraduate finance courses, the former is clearly a point of confusion for many students and its handl...

We study the issuance and payout policy that maximizes the value of a firm facing both agency costs of free cash-flow and external financing costs. We find that firms have target cash levels and optimally issue equity when they run out of cash. We characterize the process modelling the number of outstanding shares and the dynamics of the stock prices. In line with the leverage effect identified...

This paper documents the short and long term balance sheet effect of cash flows. We show that cash savings in the short run and debt reduction in both the short and the long run account for a substantial fraction of cash flow use. Although, in the long run, investment exhibits substantial sensitivity to cash flows, investment does not absorb the entire cash flow shock. In fact, the tighter the ...