We model the interplay between cash and debt policies in the presence of financial constraints. While saving cash allows constrained firms to hedge against future cash flow shortfalls, reducing current debt – “saving borrowing capacity” – is a more effective way of securing investment in high cash flow states. This trade-off implies that constrained firms will allocate cash flows into cash hold...

In all large scale projects, there correspond cash flows that incur throughout the life of the project. The scheduling of these projects to maximize the present value of the cash flows has been a topic of recent research. The basic assumption of earlier research is that the cash flows are mainly associated with some events of the project and they occur at the event realization times. However, i...

Risk analysis involves the development of the probability distribution for the measure of effectiveness. The risk associated with an investment alternative is generally either given as the possibility of an unfavorable value of the measure of effectiveness or measured by the variance of the measure of effectiveness. In an uncertain economic decision environment, an expert’s knowledge about disc...

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...

This paper examines the relative importance of earnings and operating cash flows in equity valuation. In contrast to previous studies that use stock returns or future operating cash flows, we use ex post intrinsic value of equity as the criterion for comparison. Ex post intrinsic value of equity is determined adopting both the discounted dividend and residual income models with ex post (future)...

The complexity of R&D investment projects makes this task especially challenging. R&D investments are characterized by multiple sources of uncertainty, and produce cash flows only after many potentially unpredictable stages of research. The net present value (NPV) rule and other discounted cash flow techniques (DCF) for making R&D investment decisions seem to be inappropriate to build a portfol...

Cash takeover bids financed from internally generated cash reserves could be a function of capital market imperfections (Myers and Majluf 1984) or symptomatic of “free-cash-flow” problems (Jensen 1986, 1988). We find that bids financed from cash reserves outperform those that use debt financing. Further, ‘free cash flow’ firms outperform ‘non-free cash flow’ firms. The majority of cash bids are...