I explore the role of the Just-in-Time (JIT) inventory system in the increase of cash holdings among U.S. manufacturing firms. I first demonstrate the empirical importance of JIT in shaping cash policy. I then develop a model to analyze the mechanism through which JIT affects cash and quantify its impact. In the model, both cash and inventory can serve as working capital. As firms switch from t...

We document the evolution of productivity in a steel mini mill with fixed capital, producing an unchanged product with Leontief technology working 24/7. Despite—almost—unchanged production conditions, output doubled within the sample period (12 years). We decompose the gains into downtime reductions, more rounds of production per time, and more output per run. After attributing productivity gai...

Investment-based asset pricing research highlights the role of irreversibility as a determinant of firms’ risk and expected return. In a neoclassical model of a firm with costly scale adjustment options, we show that the effect of scale flexibility (i.e., contraction and expansion options) is to determine the relation between risk and operating leverage: risk increases with operating leverage f...

This paper uses the financial crisis of 2008 as a natural experiment to demonstrate that when measuring investment-cash flow sensitivity, the value of a firm‟s assets that can be used as collateral should be taken into account. Using panel data on U.S. firms from 1990 to 2011, it was found that the share of physical capital in assets has a strong influence on investment-cash flow sensitivity, w...

This paper derives a preemptive equilibrium in strategic investment in alternative projects. The problem is formulated in a real options model with a multidimensional state variable that represents project-specific uncertainty. The proposed method enables us to evaluate the value of potential alternatives. The results not only extend previous studies with a one-dimensional state variable but al...

In the managerial myopia literature the firm always faces some agency problem or other market imperfection. It is unclear whether the myopic behavior found in these models is due to stock-based incentives or the model's other market imperfections. This paper points out that stock incentives do not lead to myopia unless they result in more emphasis on the short-term than would occur under an opt...

Our paper studies an economy in which each financial institution takes into account that if it has to sell its assets after others have already sold, the price will be lower. This causes preemptive selling, driven not by actual margin calls, but by the fear of future margin calls. Financial institutions cannot determine their optimal capitalizations in isolation, but need to know the aggregate ...

This article develops a real options model to study the interaction of industry structure and takeovers. In an asymmetric industry equilibrium, firms have an endogenous incentive to merge when restructuring decisions are motivated by operating and strategic benefits. The model predicts that (i) merger activities are more likely in more concentrated industries or in industries that are more expo...

Working capital management (WCM) is a critical matter for the growth of firms, especially small and medium-sized manufacturing companies faced with liquidity shortages whose current assets account significant part their investments. These characteristics describe most in fish processing industry. Using sample more than 1050 European during period 2013–2020 applying dynamic panel data methods, t...

ABSTRACT We examine the real effects of lease-capitalization rules (i.e., standards that require firms to capitalize finance leases) on corporate investment. show introduction these leads a decrease in investment, which is more pronounced for with high reliance leases. posit and find lease capitalization affects investment via learning channel contracting channel. Regarding first channel, we ar...