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Optimal corporate investment and financing policies with time-varying investment opportunities

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). / 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. / by Linjiang Cai. / S.M.

Identiferoai:union.ndltd.org:MIT/oai:dspace.mit.edu:1721.1/64581
Date January 2011
CreatorsCai, Linjiang
ContributorsJohn E. Parsons., Massachusetts Institute of Technology. Computation for Design and Optimization Program., Massachusetts Institute of Technology. Computation for Design and Optimization Program.
PublisherMassachusetts Institute of Technology
Source SetsM.I.T. Theses and Dissertation
LanguageEnglish
Detected LanguageEnglish
TypeThesis
Format68 p., application/pdf
RightsM.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission., http://dspace.mit.edu/handle/1721.1/7582

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