How Do Firms Finance Large Cash Flow Requirements?
How do firms finance large cash flow requirements? We examine this in the context of firms that are subject to substantial cash flow requirements. We find that trade credit, inventory and cash stock reductions are all important in the short term for mild requirements. Larger and longer cash flow sho...
| Main Authors: | , , |
|---|---|
| פורמט: | Working paper |
| שפה: | English |
| יצא לאור: |
Oxford Finance
2008
|
| _version_ | 1826256401746362368 |
|---|---|
| author | Huang, Z Mayer, C Sussman, O |
| author_facet | Huang, Z Mayer, C Sussman, O |
| author_sort | Huang, Z |
| collection | OXFORD |
| description | How do firms finance large cash flow requirements? We examine this in the context of firms that are subject to substantial cash flow requirements. We find that trade credit, inventory and cash stock reductions are all important in the short term for mild requirements. Larger and longer cash flow shortages give rise to more equity than debt finance. After the shocks, firms gradually adjust their leverage back to pre-shock levels by retiring debt and issuing equity. Financing patterns during a shock are consistent with a pecking-order theory of finance, whereas the adjustment afterwards is consistent with a trade-off theory. |
| first_indexed | 2024-03-06T18:01:42Z |
| format | Working paper |
| id | oxford-uuid:00011e7b-1b71-46bc-bbf2-e453f5842b17 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T18:01:42Z |
| publishDate | 2008 |
| publisher | Oxford Finance |
| record_format | dspace |
| spelling | oxford-uuid:00011e7b-1b71-46bc-bbf2-e453f5842b172022-03-26T08:27:09ZHow Do Firms Finance Large Cash Flow Requirements?Working paperhttp://purl.org/coar/resource_type/c_8042uuid:00011e7b-1b71-46bc-bbf2-e453f5842b17EnglishDepartment of Economics - ePrintsOxford Finance2008Huang, ZMayer, CSussman, OHow do firms finance large cash flow requirements? We examine this in the context of firms that are subject to substantial cash flow requirements. We find that trade credit, inventory and cash stock reductions are all important in the short term for mild requirements. Larger and longer cash flow shortages give rise to more equity than debt finance. After the shocks, firms gradually adjust their leverage back to pre-shock levels by retiring debt and issuing equity. Financing patterns during a shock are consistent with a pecking-order theory of finance, whereas the adjustment afterwards is consistent with a trade-off theory. |
| spellingShingle | Huang, Z Mayer, C Sussman, O How Do Firms Finance Large Cash Flow Requirements? |
| title | How Do Firms Finance Large Cash Flow Requirements? |
| title_full | How Do Firms Finance Large Cash Flow Requirements? |
| title_fullStr | How Do Firms Finance Large Cash Flow Requirements? |
| title_full_unstemmed | How Do Firms Finance Large Cash Flow Requirements? |
| title_short | How Do Firms Finance Large Cash Flow Requirements? |
| title_sort | how do firms finance large cash flow requirements |
| work_keys_str_mv | AT huangz howdofirmsfinancelargecashflowrequirements AT mayerc howdofirmsfinancelargecashflowrequirements AT sussmano howdofirmsfinancelargecashflowrequirements |