IDEAS home Printed from https://ideas.repec.org/h/spr/conchp/978-3-7908-2131-4_1.html
   My bibliography  Save this book chapter

What Can Cash Shortfalls and Windfalls Tell Us About Finance Constraints?

In: The Economics of Imperfect Markets

Author

Listed:
  • Toni M. Whited

    (University of Rochester)

Abstract

This paper examines the relative magnitude of financial versus real frictions by looking at how firms react to quasi-exogenous cash shortfalls to pension assets. To answer the question theoretically, we examine a dynamic model of financing and exogenous cash shortfalls. We find that when financing costs are high, firms adjust on real margins and vice versa. We find that firms optimally avoid costly cash shortfalls, only experiencing these events after serious negative shocks to profits. We also find that commonly used regression tests for the presence of finance constraints can produce false positives. In contrast, regression discontinuity techniques can provide an accurate method for uncovering the existence and magnitudes of finance constraints.

Suggested Citation

  • Toni M. Whited, 2010. "What Can Cash Shortfalls and Windfalls Tell Us About Finance Constraints?," Contributions to Economics, in: Giorgio Calcagnini & Enrico Saltari (ed.), The Economics of Imperfect Markets, chapter 0, pages 17-32, Springer.
    • Handle: RePEc:spr:conchp:978-3-7908-2131-4_1
    DOI: 10.1007/978-3-7908-2131-4_1
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kim, Tae-Nyun & Kim, Kihun, 2018. "External cost of leverage adjustment: Evidence from defined benefit pension plans," Journal of Economics and Business, Elsevier, vol. 96(C), pages 1-14.
    2. Giorgio Calcagnini & Annalisa Ferrando & Germana Giombini, 2015. "Multiple market imperfections, firm profitability and investment," European Journal of Law and Economics, Springer, vol. 40(1), pages 95-120, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:conchp:978-3-7908-2131-4_1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.