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- Publisher Website: 10.1007/s10203-011-0126-y
- Scopus: eid_2-s2.0-84884703164
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Article: The firm under uncertainty: real and financial decisions
Title | The firm under uncertainty: real and financial decisions |
---|---|
Authors | |
Keywords | Background Risk Capital Structure Price Uncertainty |
Issue Date | 2013 |
Publisher | Springer-Verlag Italia Srl. The Journal's web site is located at http://www.springer.it/libri_libro.asp?id=205 |
Citation | Decisions In Economics And Finance, 2013, v. 36 n. 2, p. 125-136 How to Cite? |
Abstract | This paper examines the interplay between the real and financial decisions of the competitive firm under output price uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk attitude of the firm and the incidence of the underlying uncertainty. We further show that the firm's optimal input mix depends on its optimal debt-equity ratio, thereby rendering the interdependence of the real and financial decisions of the firm. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences so as to ensure that the firm's optimal output is adversely affected upon the introduction of the background risk. © 2012 Springer-Verlag. |
Persistent Identifier | http://hdl.handle.net/10722/177790 |
ISSN | 2023 Impact Factor: 1.4 2023 SCImago Journal Rankings: 0.458 |
ISI Accession Number ID |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Broll, U | en_US |
dc.contributor.author | Wong, KP | en_US |
dc.date.accessioned | 2012-12-19T09:39:55Z | - |
dc.date.available | 2012-12-19T09:39:55Z | - |
dc.date.issued | 2013 | en_US |
dc.identifier.citation | Decisions In Economics And Finance, 2013, v. 36 n. 2, p. 125-136 | en_US |
dc.identifier.issn | 1593-8883 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177790 | - |
dc.description.abstract | This paper examines the interplay between the real and financial decisions of the competitive firm under output price uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk attitude of the firm and the incidence of the underlying uncertainty. We further show that the firm's optimal input mix depends on its optimal debt-equity ratio, thereby rendering the interdependence of the real and financial decisions of the firm. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences so as to ensure that the firm's optimal output is adversely affected upon the introduction of the background risk. © 2012 Springer-Verlag. | en_US |
dc.language | eng | en_US |
dc.publisher | Springer-Verlag Italia Srl. The Journal's web site is located at http://www.springer.it/libri_libro.asp?id=205 | en_US |
dc.relation.ispartof | Decisions in Economics and Finance | en_US |
dc.rights | The original publication is available at www.springerlink.com | - |
dc.subject | Background Risk | en_US |
dc.subject | Capital Structure | en_US |
dc.subject | Price Uncertainty | en_US |
dc.title | The firm under uncertainty: real and financial decisions | en_US |
dc.type | Article | en_US |
dc.identifier.email | Wong, KP: kpwongc@hkucc.hku.hk | en_US |
dc.identifier.authority | Wong, KP=rp01112 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.1007/s10203-011-0126-y | en_US |
dc.identifier.scopus | eid_2-s2.0-84884703164 | en_US |
dc.identifier.hkuros | 226684 | - |
dc.identifier.spage | 125 | en_US |
dc.identifier.epage | 136 | en_US |
dc.identifier.isi | WOS:000455418400002 | - |
dc.publisher.place | Italy | en_US |
dc.identifier.scopusauthorid | Broll, U=7004024398 | en_US |
dc.identifier.scopusauthorid | Wong, KP=7404759417 | en_US |
dc.identifier.citeulike | 10217284 | - |
dc.identifier.issnl | 1129-6569 | - |