search query: @indexterm CASH FLOW / total: 488
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| Author: | Stulz, R.M. |
| Title: | Managerial discretion and optimal financing policies |
| Journal: | Journal of Financial Economics
1990 : JUL, VOL. 26:1, p. 3-27 |
| Index terms: | FINANCIAL POLICY CORPORATE FINANCE MANAGEMENT CONTROL DECISION MAKING INVESTMENT OPTIMIZATION PROJECTS CASH FLOW |
| Language: | eng |
| Abstract: | Financing policies are analyzed in a firm owned by atomistic shareholders who observe neither cash flows nor management's investment decisions. Management derives perquisites from investment and invests as much as possible. Since it always claims that cash flow is too low to fund all positive net present value projects, its claim is not credible when cash flow is truly low. Consequently, management is forced to invest too little when cash flow is low and chooses to invest too much when it is high. Financing policies, by influencing the resources under management's control, can reduce the costs of over- and under-investment. |
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