Corporate portfolio management

Rochet, Jean‐Charles; Villeneuve, Stéphane

doi:10.1007/s10436-005-0018-7

Cited by 16 publications

(5 citation statements)

References 13 publications

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“…then we have the following verification result: The proof of Theorem 4.2 is an adaptation of that of Theorem 2.4 (we refer the reader to [21], p. 235 for details). The presence of the Neumann condition U ′ (x * 1 ) = 1 yields that the optimal dividend-distribution strategy L * coincides with the local time of the process X at level x * 1 .…”

Section: The Value Function and The First-bestmentioning

confidence: 80%

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Market Frictions and Corporate Finance: An Overview Paper

Moreno-Bromberg

Rochet

2014

SSRN Journal

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Section: The Value Function and The First-bestmentioning

confidence: 80%

“…Finally, in Sect. 4 we present the results of Rochet and Villeneuve [21], who adapt the model in [12] to study a Merton-style problem where portfolio choice is not made by an individual investor, but by a bank. Further readings are suggested in Sect.…”

Section: Introductionmentioning

confidence: 99%

Market Frictions and Corporate Finance: An Overview Paper

Moreno-Bromberg

Rochet

2014

SSRN Journal

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“…Continuous time models could establish a link between company stock value dynamics and the choice of portfolio assets and tell us something about the long-term effects of a given portfolio choice. The theory developed by J.-C. Rochet on the optimal dividend policy [41] could be extended to the case where the trend and the volatility of the company's assets are controlled ( Figure 5). In this setting, the firm portfolio would be connected to its risk profile and would then, allow the analysis of different performance criterion, like index tracking or expected life time maximisation.…”

Section: Quantitative Models To Assess Utilities Business Model Boundsmentioning

confidence: 99%

Long-Term Risk Management for Utility Companies: The Next Challenges

Aïd

2010

Int. J. Theor. Appl. Finan.

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Since the energy markets liberalisation at the beginning of the 1990s in Europe, electricity monopolies have gone through a profound evolution process. From an industrial organisation point of view, they lost their monopoly on their historical business, but gained the capacity to develop in any sector. Companies went public and had to upgrade their financial risk management process to international standards and implement modern risk management concepts and reporting processes (VaR, EaR...). Even though important evolutions have been accomplished, we argue here that the long-term risk management process of utility companies has not yet reached its full maturity and is still facing two main challenges. The first one concerns the time consistency of long-term and mid-term risk management processes. We show that consistencies issues are coming from the different classical financial parameters carrying information on firms' risk aversion (cost of capital and short-term risk limits) and the concepts inherited from the monopoly period, like the loss of load value, that are still involved in the utility company decision-making process. The second challenge concerns the need for quantitative models to assess their business model. With the deregulation, utilities have to address the question of their boundaries. Although intuition can provide insights on the benefits of some firm structures like vertical integration, only sound and tractable quantitative models can bring answers to the optimality of different possible firm structures.

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“…The optimal policy is to accumulate a buffer stock of savings up to a point and pay out as dividends all income above that level. A number of other papers analyze various additional features in a similar framework: Radner and Shepp (1996) and Dutta and Radner (1999) add an operation policy that controls risk-return properties of the earnings process, Décamps and Villeneuve (2007) analyze the optimal exercise of a growth option, Peura and Keppo (2006) introduce a delay time to recapitalization, and Rochet and Villeneuve (2005) allow flexible allocation of reserves in risky and safe alternatives. Décamps et al (2011) assume costly recapitalization and analyze the implications of such financing frictions on the firm's cash management and stock price dynamics.…”

Section: Introductionmentioning

confidence: 99%

Exit Options and Dividend Policy Under Liquidity Constraints

Murto

Terviö

2014

Int Economic Review

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We introduce a post-entry liquidity constraint to the standard model of a …rm with serially correlated pro…tability and an irreversible exit decision. We assume that …rms with no cash holdings and negative cash ‡ow must either exit or raise new cash at a transaction cost. This creates a precautionary motive for holding cash, which must be traded o¤ against the liquidity cost of holding cash. We characterize the optimal exit and payout policy. The direct e¤ect of …nancial frictions is to impose ine¢ cient exit, but there is also an indirect e¤ect through higher equilibrium price which leads to ine¢ cient survival. (D81, D92, G35)We thank the Editor, two anonymous referees,

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Corporate portfolio management

Abstract: Corporate investment, Portfolio management, Liquidity management, Corporate risk aversion, G11, G24, G32,

Cited by 16 publications

References 13 publications

Market Frictions and Corporate Finance: An Overview Paper

Market Frictions and Corporate Finance: An Overview Paper

Long-Term Risk Management for Utility Companies: The Next Challenges

Exit Options and Dividend Policy Under Liquidity Constraints

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