The Value of Financial Flexibility
Gamba, Andrea and Triantis, Alexander. (2008) The Value of Financial Flexibility. Journal of Finance, Vol.63 (No.5). pp. 2263-2296. ISSN 0022-1082Full text not available from this repository.
Official URL: http://dx.doi.org/10.1111/j.1540-6261.2008.01397.x
We develop a model that endogenizes dynamic financing, investment, and cash retention/payout policies in order to analyze the effect of financial flexibility on firm value. We show that the value of financing flexibility depends on the costs of external financing, the level of corporate and personal tax rates that determine the effective cost of holding cash, the firm's growth potential and maturity, and the reversibility of capital. Through simulations, we demonstrate that firms facing financing frictions should simultaneously borrow and lend, and we examine the nature of dynamic debt and liquidity policies and the value associated with corporate liquidity.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||Faculty of Social Sciences > Warwick Business School > Finance Group
Faculty of Social Sciences > Warwick Business School
|Journal or Publication Title:||Journal of Finance|
|Publisher:||Wiley-Blackwell Publishing, Inc.|
|Number of Pages:||34|
|Page Range:||pp. 2263-2296|
|Access rights to Published version:||Restricted or Subscription Access|
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