We analyse the investment-to-cash flow relationship in Europe using a sample of manufacturing small- and medium-sized enterprises (SME) over period 2009–2016. investigate effect regional institutional quality on sensitivity, finding that, although credit constraints remain serious problem for European SMEs, high-quality institutions contribute to mitigate dependency internally-generated resourc...

Monetary policy seeks to promote economic expansions or contractions by managing interest rates or money supply. The impact of these mechanisms on businesses depends on their ability to make predictions about the development of the market and the performance and profitability of their projects. Also, interest rates impact their ability to raise funds for operations, forcing them to make changes...

Until now single values of IRR are traditionally used to estimate the time value of cash flows. Since uncertainty exists in estimating cost data, the resulting decision may not be reliable. The most commonly cited drawbacks to using the internal rate of return in evaluatton of deterministic cash flow streams is the possibility of multiple conflicting internal rates of return. In this paper we p...

We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs describe the strengths and risks of the investments as well as expected postinvestment actions. We classify the risks into three categories and relate them to the allocation of cash flow rights, contingencies, control rights, and liquidation rights between VCs and entrepreneurs. The risk results s...

This study explains one way the home country institutional environment causes strategy differences across firms from different countries. It contrasts the investment conduct of American, German, and Japanese firms in the 10 largest manufacturing industries. We find profound national differences among these firms that are stable across industries. These differing conducts are tied to the institu...

We show that the public market equivalent (PME) approach [Kaplan and Schoar (2005)] is equivalent to assessing the performance of PE investments using Rubinstein’s dynamic version of the capital asset pricing model [Rubinstein (1976)]. Two insights follow. First, we do not have to compute betas of PE investments, and any changes in PE cash flow betas due to changes in financial leverage, operat...

This paper examines how ownership structure and institutional development influence the liquidity management and investment policies of firms, in response to the threat of political extraction in China. First, we document evidence that firms controlled by private entrepreneurs hold less cash reserves than their state-owned counterparts. In addition, cash holdings (investments) is positively (ne...

The common paradigm for risk-neutral real-option pricing is a special case encompassed within our general model for valuing investment opportunities. Risk-neutral real option prices deviate from the risk-averse real option values that apply in an incomplete market, giving different rankings of investment opportunities and different optimal exercise strategies. Unlike risk-neutral prices, more g...

Service firms seek customers with high revenues, profits, or lifetime value. However, they frequently ignore variations in consumption that lead to cash flow variability and adversely influence service operations and financial performance. This study shows that variation in individual customers’ consumption or spending on services can be decreased in ways that are actionable by most managers, w...

Corporate finance is a branch of that focuses on how companies handle their cash flow, raise capital, make investments, and implement accounting systems [...]