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Article dans une revue Journal of Finance Année : 2011

Free Cash Flows, Inssuance Costs and Volatility

Résumé

We develop a dynamic model of a firm facing agency costs of free cash flow and external financing costs. An explicit solution for the firm's optimal balance sheet dynamics is derived. Financial frictions affect issuance and dividend policies, the value of cash holdings, and the dynamics of stock prices. The model predicts that the marginal value of cash varies negatively with the stock price, and positively with the volatility of the stock price. This yields novel insights on the asymmetric volatility phenomenon, on risk management policies, and on how business cycles and agency costs affect the volatility of stock returns
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Dates et versions

halshs-00738437, version 1 (04-10-2012)

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Jean-Paul Decamps, Thomas Mariotti, Jean-Charles Rocher, Stephane Villeneuve. Free Cash Flows, Inssuance Costs and Volatility. Journal of Finance, 2011, 66 (5), pp.1501-1544. ⟨10.1111/j.1540-6261.2011.01680.x⟩. ⟨halshs-00738437⟩
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