Year: 2007
Type: book
Abstract: How do firms finance large cash flow requirements? We examine this in the context\nof firms that are subject to substantial cash flow requirements. We find that trade\ncredit, inventory and cash stock reductions are all important in the short term for mild\nrequirements. Larger and longer cash flow shortages give rise to more equity than\ndebt finance. After the shocks, firms gradually adjust their leverage back to pre-shock\nlevels by retiring debt and issuing equity. Financing patterns during a shock are\nconsistent with a pecking-order theory of finance, whereas the adjustment afterwards\nis consistent with a trade-off theory.
Authors: Zhangkai Huang, Colin Mayer, Oren Sussman
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2112697674