According to the existing literatures, there are few directly discussions about the relations of cash flow volatility on firm value and the issues of cash flow volatility are relatively disadvantage to those of earning volatility, arousing the interest of this study.Therefore, this study verifies the effect of cash flow volatility on firm value by using data of listed companies in Taiwan and the method of Pooled Regression. Also, the number of companies are divided up based on the median of cash flow¡Bdebt ratio and total asset, and examine which circumstances are more significant statistically. Finally, this study verifies the effect of earning volatility and earning management on firm value to explain that cash flow volatility is more effective on firm value. The empirical results show that cash flow volatility is negatively on firm value, and the effects are more significant statistically in small asset firms¡Blow debt ratio firms and high cash flow firms. But earning volatility is not significant statistically on firm value, and earning management is ineffective on firm value. The results indirectly explain that cash flow volatility is a more effective indicator on firm value and explain that managers managing earning to increase firm value are useless. According to the empirical results, there is no benefit when managers continue stabilizing earnings based on earning management. If investors continue selecting companies to invest based on earning volatility, the effects could be less than the ones of cash flow volatility. Therefore, the empirical results provide one indicator of the evaluations of firm value with managers and investors.

This thesis investigates how CEO risk taking incentives related to compensation in the form of executive stock options affect the decision to engage in merger and acquisition (M&A) activities with particular attention to same-industry versus cross-industry acquisitions. Risk taking incentives increase the propensity of M&As, especially for same-industry M&As. Furthermore, risk taking incentives increase the likelihood of cash payment for both same and cross-industry acquisitions. We do not find a significant direct stock price response difference between same-industry and cross-industry acquiring firms. The market responds favorably when risk taking incentives are higher for both same-industry acquisitions and cross-industry takeovers. We further find that the acquiring firm’s post-acquisition cash flow volatility is also positively related to risk taking incentives for both same- and cross-industry M&As.

This paper investigates the effect of correlation and volatilities of firm and project cash flows on the choice of project finance. I use a pure-play approach to measure unobservable project cash flows for a sample of 440 US and non-US firms that invested in 577 projects from 1990 to 2008 and find evidence that the probability of project finance is increasing in cash flow volatility difference between firm and project cash flows. The likelihood of the project finance is greater when volatilities are different and the correlation between firm and project cash flows is high. I also find that firms are likely to choose corporate finance for low correlation and low and similar volatilities between firm and project cash flows. This empirical work is consistent with the theoretical predictions in Leland (2007) that provides a potential explanation for the existence of project finance based on financial synergies.