Dear colleagues,
You are kindly invited to attend the following VGSF research seminars:
Seminar 1: What gives? A Study of Firms' Reactions to Cash Shortfalls
Speaker: Toni Whited (University of Wisconsin-Madison)
Time: 2008-04-04, Friday, 14:00-15:30
Seminar 2: Time Inconsistent Stochastic Control
Speaker: Tomas Björk (Stockholm School of Economics)
Time: 2008-04-04, Friday, 16:00-17:30
Location: 1190, Heiligenstädter Strasse 46-48, seminar room 1 (ground
floor) (WU-H46)
The paper to be presented by Toni Whited can be downloaded from the VGSF
website (
http://www.vgsf.ac.at/activities/seminars.htm). The abstracts
are attached below.
Best regards,
Youchang
*What Gives? A Study of FirmsReactions to Cash Shortfalls*
*Abstract*
This paper examines the relative magnitude of financial versus real
frictions by looking at how firms react to exogenous cash shortfalls. 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. To answer
the question empirically, we use a regression discontinuity design, in
which the discontinuity is the point of violation of underfunding of
corporate defined benefit pension plans. We examine firm-year
observations in which the firms pension assets are just barely less
than its pension liabilities, and in which, consequently, the firm must
make a mandatory contribution to its pension plan. We compare this group
to a control group of firm-year observations in which the
rm has just
barely escaped having to make a mandatory contribution. In this
quasi-experimental setting, we find little evidence that firms cut back
on their real activities such as employment and investment. Instead,
they use a variety of financial tools, such as cash, working capital
management, and short-term external financing to fund their pension
liabilities.
*Time Inconsistent Stochastic Control
Abstract
*In this talk we will present some recent work on non-classical
stochastic control problems which are "time inconsistent" in the sense
that they cannot be treated by dynamic programming. We present a
game-theoretic approach to such problems and we derive an extended
version of the Hamilton-Jacobi-Bellman equation in terms of a system of
PDEs for the determination of the associated subgame perfect Nash
equilibrium strategy. We also present applications from finance.