Show simple item record

dc.contributor.authorBoyle, Glennen_NZ
dc.contributor.authorGuthrie, Graemeen_NZ
dc.date.available2011-04-07T03:18:56Z
dc.date.copyright2001-04-27en_NZ
dc.identifier.citationBoyle, G., & Guthrie, G. (2001, April 27). Investment, uncertainty, and liquidity. University of Otago Department of Finance Seminar Series. Presented at the University of Otago, Finance department, Seminar.en
dc.identifier.urihttp://hdl.handle.net/10523/1515
dc.description.abstractDespite extensive research, the exact nature of the dependence of corporate investment on firm liquidity, uncertainty, and hedging policy remains obscure. First, although it is widely recognized that external financing can be costlier than internal financing, thereby implying that the quantity of new investment can be sensitive to the availability of internal funds, the extent to which inter-firm variations in investment-cashflow sensitivities reflect differences in the severity of financing constraints is a matter of considerable debate. A number of studies (e.g., Fazzari, Hubbard and Petersen, 1988; Hoshi, Kashyap and Scharfstein, 1991; Whited, 1992) find that firms deemed likely to be financially-constrained display higher investment-cashflow sensitivities than other firms, but recent work by Kaplan and Zingales (1997, 2000) criticizes this approach and suggests that investment-cashflow sensitivities provide little information about the degree to which firms are financially constrained. Second, if firms are indeed subject to financing constraints, then Lessard (1990) and Froot, Scharfstein and Stein (1993) argue that hedging is valuable because it helps ensure that firms have sufficient internal funds to take advantage of profitable investment opportunities. Thus, hedging firms should invest more than non-hedging firms, all else equal. However, recent empirical work by Allayannis and Mozumdar (2000) and Geczy, Minton and Schrand (1997) indicates no difference in investment rates between hedgers and non-hedgers. Third, theoretical models predict that greater uncertainty reduces investment, either because of real option considerations (e.g., McDonald and Siegel, 1986) or because of financial distress costs (e.g., Stulz, 1999). But empirical research by Ghoshal and Loungani(1996, 2000) and Caballero and Pindyck (1996) finds a much weaker relationship than implied by these models. Overall, considerable gaps between theory and evidence exist in these three areas.en_NZ
dc.format.mimetypeapplication/pdf
dc.relation.ispartofUniversity of Otago Department of Finance Seminar Seriesen_NZ
dc.relation.urihttp://www.business.otago.ac.nz/finc/research/seminars_01.htmlen_NZ
dc.subjectcorporate investmenten_NZ
dc.subjectfirm liquidityen_NZ
dc.subjectexternal financingen_NZ
dc.subjectinternal financingen_NZ
dc.subject.lcshHF Commerceen_NZ
dc.subject.lcshHF5601 Accountingen_NZ
dc.subject.lcshHG Financeen_NZ
dc.titleInvestment, uncertainty, and liquidityen_NZ
dc.typeConference or Workshop Item (Seminar, Speech or Other Presentation)en_NZ
dc.description.versionUnpublisheden_NZ
otago.bitstream.pages32en_NZ
otago.date.accession2007-04-12en_NZ
otago.schoolFinanceen_NZ
otago.openaccessOpen
otago.place.publicationDunedin, New Zealanden_NZ
dc.identifier.eprints594en_NZ
dc.description.refereedNon Peer Revieweden_NZ
otago.school.eprintsFinance & Quantitative Analysisen_NZ
dc.description.referencesAllayannis, G. and A. Mozumdar, 2000. Cash flow, investment, and hedging. SSRN Working Paper, ID243639. Alsop, S., 2001. Oh, these are the days of glory. Fortune, 19 March 2001. Brennan, M. and E. Schwartz, 1985. Evaluating natural resource investments. Journal of Business 58, 135-157. Caballero, R. and R. Pindyck, 1996. Uncertainty, investment, and industry evolution. International Economic Review 37, 641-662. Dixit, A. and R. Pindyck, 1994. Investment Under Uncertainty. Princeton University Press, Princeton, NJ. Fazzari, S., R. Hubbard and B. Petersen, 1988. Finance constraints and corporate investment. Brookings Papers on Economic Activity, 141-195. Froot, K., D. Scharfstein and J. Stein, 1993. Risk management: Coordinating corporate investment and financing policies. Journal of Finance 48, 1629-1658. Géczy, C., B. Minton and C. Schrand, 1997. Why firms use currency derivatives. Journal of Finance 52, 1323-1355. Greenwald,B., J. Stiglitz and A.Weiss, 1984. Informational imperfections in the capital market and macroeconomic fluctuations. American Economic Review 74, 194-199. Ghoshal, V. and P. Loungani, 1996. Product market competition and the impact of price uncertainty on investment: Some evidence from US manufacturing industries. Journal of Industrial Economics 44, 217-228. Ghoshal, V. and P. Loungani, 2000. The differential impact of uncertainty on investment in small and large businesses. Review of Economics and Statistics 82, 338-343. Hoshi, T., A. Kashyap and D. Scharfstein, 1991. Corporate structure, liquidity, and investment: Evidence from Japanese panel data. Quarterly Journal of Economics 106, 33-60. Ingersoll, J. and S. Ross, 1992. Waiting to invest: Investment and uncertainty. Journal of Business 65, 1-29. Jensen, M. and W. Meckling, 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3, 305-360. Kaplan, S. and L. Zingales, 1997. Do investment-cash flow sensitivities provide useful measures of financing constraints? Quarterly Journal of Economics 112, 169-215. Kaplan, S. and L. Zingales, 2000. Investment-cash flow sensitivities are not valid measures of financing constraints. NBER Working Paper 7659. Lucas, R., 1982. Interest rates and currency prices in a two-currency world. Journal of Monetary Economics 10, 335-59. Majd, S. and R. Pindyck, 1987. Time to build, option value and investment decisions. Journal of financial Economics 18, 7-27. Mauer, D. and A. Triantis, 1994. Interactions of corporate financing and investment decisions: A dynamic framework. Journal of Finance 49, 1253-1277. McDonald, R. and D. Siegel, 1986. The value of waiting to invest. Quarterly Journal of Economics 101, 707-727. Mello. A. and J. Parsons, 2000. Hedging and liquidity. Review of Financial Studies 13, 127- 153. Milne, A. and A. Whalley, 2000. 'Time to build, option value and investment decisions': a comment. Journal of Financial economics 56, 325-332. Myers, S. and N. Majluf, 1984. Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics 13, 187-221. Poterba, J. and L. Summers, 1995. A CEO survey of US companies's time horizons and hurdle rates. Sloan Management Review, 43-53. Shin, H. and R. Stulz, 2000. Shareholder wealth and firm risk. Ohio State University Dice Center Working Paper No. 2000-19. Stulz, R., 1990. Management discretion and optimal financing policies. Journal of Financial Economics 26, 3-27. Stulz, R.,, 1999. What's wrong with modern capital budgeting? Financial Practice and Education 9, 7-11. Summers, Lawrence H., 1987. Investment incentives and the discounting of depreciation allowances, in The Effects of Taxation on Capital Accumulation, ed. Martin Feldstein, Chicago: University of Chicago Press. Svensson, L., 1985. Money and asset prices in a cash-in-advance economy. Journal of Political Economy 93, 919-944. Triantis, A. and J. Hodder, 1990. Valuing flexibility as a complex option. Journal of Finance 43, 1-19. Whited, T., 1992. Debt, liquidity constraints, and corporate investment: Evidence from panel data. Journal of Finance 47, 1425-1460.en_NZ
otago.event.dates27 April 2001en_NZ
otago.event.placeRoom 2.07, University of Otago, Dunedin, Otagoen_NZ
otago.event.typeotheren_NZ
otago.event.titleUniversity of Otago, Finance department, Seminaren_NZ
 Find in your library

Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record