Corporate Financial Policies under Heterogeneous Beliefs

Corporate Financial Policies under Heterogeneous Beliefs

Abstract:: This study investigates a firm’s financing, investment, and payout policies through a rational expectation equilibrium based on which managers and outside investors have heterogeneous prior beliefs. The proposed model demonstrates that managers tend to overinvest (underinvest) if the exte...

Full description

Bibliographic Details
Main Authors: Wei-Ning Niu, Wei-Xing Wu, Leng Ling, Rong-Xi Zhou
Format: Article
Language:English
Published: KeAi Communications Co., Ltd. 2018-06-01
Series:Journal of Management Science and Engineering
Online Access:http://www.sciencedirect.com/science/article/pii/S2096232019300472
id doaj-b9ef7c5bd20a4b5db87551f84226721c
record_format Article
spelling doaj-b9ef7c5bd20a4b5db87551f84226721c2020-11-25T02:39:27ZengKeAi Communications Co., Ltd.Journal of Management Science and Engineering2096-23202018-06-0132101124Corporate Financial Policies under Heterogeneous BeliefsWei-Ning Niu0Wei-Xing Wu1Leng Ling2Rong-Xi Zhou3International School of Business, Beijing International Studies University, Beijing 100024, China; niuweining11@126.comSchool of Banking and Finance, University of International Business and Economics, Beijing 100029, China; wilsonwxwu@126.comBunting College of Business, Georgia College and State University, Milledgeville, GA, USA; leng.ling@gcsu.eduSchool of Banking and Finance, University of International Business and Economics, Beijing 100029, China; wilsonwxwu@126.com; Correspondence: zrx103@126.comAbstract:: This study investigates a firm’s financing, investment, and payout policies through a rational expectation equilibrium based on which managers and outside investors have heterogeneous prior beliefs. The proposed model demonstrates that managers tend to overinvest (underinvest) if the extent of heterogeneousness is above (below) a threshold, which differs under distinct circumstances. Moreover, a price bubble is positively related to overinvestment, and the model shows that a firm’s optimal financing choices and payout policies vary with the assumption of heterogeneous beliefs. Keywords:: Heterogeneous beliefs, Corporate financing, Investment level, Cash dividend, Stock repurchasehttp://www.sciencedirect.com/science/article/pii/S2096232019300472
collection DOAJ
language English
format Article
sources DOAJ
author Wei-Ning Niu
Wei-Xing Wu
Leng Ling
Rong-Xi Zhou
spellingShingle Wei-Ning Niu
Wei-Xing Wu
Leng Ling
Rong-Xi Zhou
Corporate Financial Policies under Heterogeneous Beliefs
Journal of Management Science and Engineering
author_facet Wei-Ning Niu
Wei-Xing Wu
Leng Ling
Rong-Xi Zhou
author_sort Wei-Ning Niu
title Corporate Financial Policies under Heterogeneous Beliefs
title_short Corporate Financial Policies under Heterogeneous Beliefs
title_full Corporate Financial Policies under Heterogeneous Beliefs
title_fullStr Corporate Financial Policies under Heterogeneous Beliefs
title_full_unstemmed Corporate Financial Policies under Heterogeneous Beliefs
title_sort corporate financial policies under heterogeneous beliefs
publisher KeAi Communications Co., Ltd.
series Journal of Management Science and Engineering
issn 2096-2320
publishDate 2018-06-01
description Abstract:: This study investigates a firm’s financing, investment, and payout policies through a rational expectation equilibrium based on which managers and outside investors have heterogeneous prior beliefs. The proposed model demonstrates that managers tend to overinvest (underinvest) if the extent of heterogeneousness is above (below) a threshold, which differs under distinct circumstances. Moreover, a price bubble is positively related to overinvestment, and the model shows that a firm’s optimal financing choices and payout policies vary with the assumption of heterogeneous beliefs. Keywords:: Heterogeneous beliefs, Corporate financing, Investment level, Cash dividend, Stock repurchase
url http://www.sciencedirect.com/science/article/pii/S2096232019300472
work_keys_str_mv AT weiningniu corporatefinancialpoliciesunderheterogeneousbeliefs
AT weixingwu corporatefinancialpoliciesunderheterogeneousbeliefs
AT lengling corporatefinancialpoliciesunderheterogeneousbeliefs
AT rongxizhou corporatefinancialpoliciesunderheterogeneousbeliefs
_version_ 1724785959983120384

Similar Items