Free Cash Flow, Issuance Costs, and Stock Prices

• 成果类型: Article
• 署名作者: Decamps, Jean-Paul; Mariotti, Thomas; Rochet, Jean-Charles; Villeneuve, Stephane
• 署名单位: Universite de Toulouse; Universite Toulouse 1 Capitole; Centre National de la Recherche Scientifique (CNRS); Toulouse School of Economics; Centre National de la Recherche Scientifique (CNRS); Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics; Swiss Finance Institute (SFI); University of Zurich
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2011.01680.x
• 发表日期: 2011
• 页码: 1501-1544
• 关键词: CORPORATE GOVERNANCE; transactions demand; security design; continuous-time; volatility; AGENCY; INVESTMENT; RISK; determinants; holdings

摘要

We develop a dynamic model of a firm facing agency costs of free cash flow and external financing costs, and derive an explicit solution for the firm's optimal balance sheet dynamics. 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.