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How Do Firms Finance Large Cash Flow Requirements?

Abstract:

How do firms finance large cash flow requirements? We examine this in the context of firms that are subject to substantial cash flow requirements. We find that trade credit, inventory and cash stock reductions are all important in the short term for mild requirements. Larger and longer cash flow shortages give rise to more equity than debt finance. After the shocks, firms gradually adjust their leverage back to pre-shock levels by retiring debt and issuing equity. Financing patterns during a ...

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Volume:
2008-FE-06
Series:
Financial Economics Working Papers
Publication date:
2008-01-01
URN:
uuid:00011e7b-1b71-46bc-bbf2-e453f5842b17
Local pid:
oai:economics.ouls.ox.ac.uk:14101
Language:
English

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