In this work, we build on a previous real options approach that utilizes managerial cash-flow estimates to value early stage project investments, but accounting for managerial risk aversion. We introduce a market sector indicator, which is assumed to be correlated to a tradeable market index, which, through a mapping function, drives and replicates the cash-flow estimates. The mapping allows us...

This paper investigates the connection between market valuation anda type of the merger (stock, cash) using real options setup. I solveexplicitly for the timing and terms of cash mergers in two deferent settingsto demonstrate that cash mergers generally occur at low marketvaluations, whereas stock mergers that may be observed at both low andhigh valuations; the result holds with some dierences ...

I classify CEOs as overoptimistic based on their option exercise behavior, and find that overoptimistic CEOs are more likely to pay with cash when market-wide valuations are (moderately) above their long-term trend, but not when market valuations are low. In contrast to rational CEOs, overoptimistic CEOs view their stock as overly costly and prefer cash payment, even during times of high market...

This study examines the impact of migration to electronic trading on the relative informational efficiency between an index futures contract and the underlying cash index. The recent move to electronic trading of the Hong Kong Hang Seng Index futures contract provides an opportunity to study how the change affects the effective bid and ask spread in the futures market and the dynamic relationsh...

EBITDA means earnings before (deduction of ) interest, taxation, depreciation and amortization. Many financiers and press reporters use EBITDA in a ratio with enterprise value, EV (Market value of equity + market value of debt minus surplus cash (cash not needed in the annual operations of the business)). It is compared to Enterprise Value (―EV‖), rather than equity value, because it includes t...

In this paper, we model cash flow and consumption growth rates as a vectorautoregression (VAR), from which we measure the response of cash flow growth to consumption shocks. As the appropriate cash flow proxy is not unambiguous, nor likely to be measured without error, we consider three alternatives for portfolio cash flows: cash dividends, dividends plus repurchases and corporate earnings. We ...

This paper presents an overview of information-based asset pricing. In the information-based approach, an asset is defined by its cash-flow structure. The market is assumed to have access to “partial” information about future cash flows. Each cash flow is determined by a collection of independent market factors called X-factors. The market filtration is generated by a set of information process...

This study examines the effect of technology spillovers on firms’ cash holdings. It finds that firms facing greater technology spillovers hold higher cash balances. This effect is more pronounced among financially constrained firms and for firms that are likely to benefit more from diffused technology, e.g., those have newer patents, are more profitable, face better growth opportunities and are...