Optimal corporate investment and financing policies with time-varying investment opportunities
Name
727052922-MIT.pdf
Description
Full printable version
Size
4.95 MB
Format
Adobe PDF
Checksum (MD5)
070a9c18682e4ff00e208944408a65aa
Author(s)
Cai, Linjiang
Advisor(s)
John E. Parsons.
Date Issued
2011
Publisher
Massachusetts Institute of Technology
Abstract
Bolton, Chen and Wang (2009) propose a model (the BCW model) of dynamic corporate investment, financing, and risk management for a financially constrained firm. In the BCW model, corporate risk management is a combination of internal liquidity management, financial hedging, investment, and payout decisions. However, Bolton et al. (2009) assume that the firm's investment opportunities are constant over time, which is unrealistic in many situations. I extend the analytical tractable dynamic framework of Bolton et al. (2009) for firms facing stochastic investment opportunities. My extended model can help financially constrained firms to optimally choose external financing (equity or credit line), internal cash accumulation, corporate investment, risk management and payout policies in an environment subjective to time-varying productivity shocks. The differences of policies from the BCW model and my extended model, as well as the optimal and non-optimal policies are also compared.
Description
Thesis (S.M.)--Massachusetts Institute of Technology, Computation for Design and Optimization Program, 2011.
Cataloged from PDF version of thesis.
Includes bibliographical references (p. 65-68).
Subjects
Computation for Design and Optimization Program.
MIT Department
Massachusetts Institute of Technology. Computation for Design and Optimization Program
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