Corporate liquidity and dividend policy under uncertainty

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• 作者：Nicos Koussis^a ; ^{bus.kn@fit.ac.cy} ; Spiros H. Martzoukos^b ; ^{baspiros@ucy.ac.cy} ; Lenos Trigeorgis^c ; ^{lenos@ucy.ac.cy}
• 关键词：Dividends ; Retained earnings ; Growth options ; Real options ; Capital structure ; Default ; Debt costs
• 刊名：Journal of Banking & Finance
• 出版年：2017
• 出版时间：February 2017
• 年：2017
• 卷：75
• 期：Complete
• 页码：200-214
• 全文大小：877 K
• 卷排序：75

文摘

We examine optimal liquidity (retained earnings) and dividend choice incorporating debt financing with risk of default and bankruptcy costs as well as growth options under revenue uncertainty. We revisit the conditions for dividend policy irrelevancy and the broader role of retained earnings and dividends. Retained earnings have a net positive impact on firm value in the presence of growth options, high external financing costs and low default risk. High levels of retained earnings enhance debt capacity but have a negative effect on equity value due to the likelihood of losing accumulated cash balances in case of default, unless offset by high external financing costs. Opposite directional effects of retained earnings on equity and debt create a U-shaped relation with firm value. The framework is extended to analyze management-shareholder conflicts, demonstrating that managers accumulate higher than optimal cash.