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Is Cash Negative Debt Disc

发布时间:2014-05-01 13:29:53  

Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies
by Viral Acharya, Heitor Almeida, and Murillo Campello

Discussion by Michael R. Roberts 2006 NBER Summer Institute Capital Markets and the Economy Workshop

Summary of the Theory
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Assume:
Investment financed with cash or debt Debt trades at “fair” market prices Firms can only pledge fraction of their assets

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Leads to constrained firms who can choose between
1) Issue debt/save cash today for future investment 2) Spend cash/retire debt cash today for future investment

Punch lines of the theory:
Actions 1) and 2) are not necessarily equivalent in terms of implications for investment and firm value The key in choosing between 1) and 2) is the relative timing of investments and cash flows (i.e., hedging needs)

Summary of the Empirics

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Empirical implications:
1) If ρ(Investment, Cash Flow) is low then firm should issue debt & save cash today 2) If ρ(Investment, Cash Flow) is high then firm should spend cash today & retire debt 3) No such relations for unconstrained firms

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Punch line of the Empirics:
– The data are consistent with these predictions

Overview
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We known that firms care about cash policy (survey evidence and empirical evidence) We don’t really know why This paper provides one explanation that is:
– – – – Simple Clever Novel Consistent with the data Ask for help with the assumptions of the theory Make some comments on the empirics

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I like this paper. So, let me just…
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Question #1 about the Theory (from an Empiricist) ? Assumption: Only a fraction of existing assets can collateralize debt
– – Do you have the correct motivation? Does this situation occur in practice? ...

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Yes! Suggestion: Alternative Motivation
– Any existing debt will almost surely contain covenants restricting the use of existing assets

Question #2 about the Theory (still from an Empiricist) ? Assumption: Firms can repurchase debt at market prices
– – – This situation does not occur in practice Doing so implies that creditors do not recognize expropriation Ex ante actions seems reasonable but ex post actions seem odd Can you better motivate this assumption? How sensitive are results to this assumption?

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Suggestions:
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Comment #1 on the Empirics
Identification 1: Instruments ? The empirical model:
?Debti,t ? ?1CashFlow it ? ? 2Qit ? ?3 Sizeit ? ? 4 ?CashHold it ? ?5 Debt it ?1 ? ?i ?? t ? ? it
?CashHold i ,t ? ?1CashFlow it ? ?2Qit ? ?3 Size it ? ?4 ?Debt it ? ?5CashHold it ?1 ? ?i ? ?t ??it

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Instruments: Debtit-1 and CashHoldit-1 Statistically speaking
AR(1) for Debt is 0.8; AR(1) for CashHold is 0.75 This extreme persistence suggests any lag is suspect

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Economically speaking
Maturity structure of debt almost guarantees mechanical relation with future cash hol

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