Wednesday, October 24, 2018 - 14:00 in V3-201
Integrating profitability prospects and cash management
A talk in the Bielefeld Stochastic Afternoon series by
Jean- Paul Décamps from University of Toulouse
| Abstract: |
We develop a dynamic corporate finance model in which shareholders learn about the firm's long term profitability and weigh the costs and benefits of holding cash. This leads us to study a new two-dimensional bayesian adaptive control problem that we solve explicitly. We characterize optimal dividend and issuance strategies. The model predicts that the cash target levels are non monotonic in the profitability prospects. This yields novel insights into the relationship between profitability prospects, precautionary cash savings, dividend policy, issuance policy and the dynamics of firm value.
|
Back
