Economics at your fingertips  

The impact of asymmetric ambiguity on investment and financing decisions

Jean-Laurent Viviani (), Anh Lai and Waël Louhichi

Economic Modelling, 2018, vol. 69, issue C, 169-180

Abstract: The goal of this paper is to investigate the impact of asymmetric ambiguity on corporate investment and financing strategies. Asymmetric information comes from the fact that insiders know the probability of the growth prospects of the firm while outsiders do not. Also, we assume that there are two types of firms (good and bad types) that differ in the quality of their forecasting of future cash flows. Our numerical simulations reveal that firms with more accurate forecasting of cash flows have an interest in speeding up investment in order to make it more difficult for bad firms to mimic their actions. Moreover, we show that the presence of asymmetric ambiguity leads to costly cash holding. These findings may help firms when making their investment and financing decisions under asymmetric ambiguity.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The impact of asymmetric ambiguity on investment and financing decisions (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-10-28
Handle: RePEc:eee:ecmode:v:69:y:2018:i:c:p:169-180