Dynamic Capacity Management: Implications for Operating, Investing, and Financing Activities

Subject. The article investigates the volatility of deposit cash flow. The presented study reveals the relationship between the actions of actors with different types of behavior and the volatility of deposit cash flow. Objectives. The aim is to develop an approach to identify volatility caused by behavioral reactions of economic actors. Methods. The study employs a methodological approach to the analysis of the volatility of cash flows, which involves fractal and regression analyses, the construction of Shewhart charts. The latter enabled to determine turbulent values of the deposit cash flow. Results. The volatility of deposit cash flows depends on institutional and behavioral factors. Based on fractal analysis, we determined preservation of structural conditions for deposit cash flow for 32 months. Simultaneous panic actions of actors lead to the formation of a turbulent deposit cash flow, creating shocks for the banking system. It is empirically estimated that an increase in the key rate by 1% leads to an increase in the probability of a turbulent cash flow by 1.9%. Any improvement in the news background reduces the probability of turbulent deposit cash flow. The greatest impact on the likelihood of a turbulent cash flow has a news background with a lag of two months. Conclusions. Regulation of the volatility of cash flows is advisable in a situation of panic actions on the part of economic actors. The Bank of Russia, through applying the data of the Bank of Russia Payment System, can contribute to the implementation of the policy of regulating the volatility of cash flows caused by behavioral reactions of economic actors.

How Does Web Personalization Create Value for Online Retailers? Lower Cash Flow Volatility or Enhanced Cash Flows

<p>This research has the purpose of analyzing the cash flow, capital expenditures, liquid assets, tangible assets, bank debt, firm size, research and development, growth opportunities, leverage, cash flow volatility, managerial ownership toward cash holding. The population in this research are all manufacturing firms listed on the Indonesia Stock Exchange (IDX). The sampling technique uses a purposive sampling method, and 78 observations have obtained from 26 companies for the 2016-2018 period. The method used in this research is quantitative. The results of this study indicate that liquid assets, tangible assets, and leverage have significant impact on cash holdings. In contrast, cash flow, bank debt, capital expenditure, firm size, research and development, growth opportunities, cash flow volatility, and managerial ownership do not have significant impact on cash holding.</p>

We study hedging cash-flow risks in a supply chain where firms invest internal funds to improve production efficiencies. We offer a decomposition framework to capture the cost-reduction and flexibility effect of hedging. It allows us to understand how a firm’s hedging choice depends on its supply chain partner’s decision, and how such interaction is affected by supply chain characteristics such as market size, cash-flow volatility, and correlation. When firms’ cash flows are independent of each other, they are more likely to hedge with a larger market size. When cash flows are correlated, the impact of market size and volatility on firms’ hedging decisions presents multiple patterns, contingent on whether their risks amplify or offset each other. This paper was accepted by Gustavo Manso, finance.

This study investigates the effect of cash flow uncertainty on working capital in the BIST Transportation Index between 2015 and 2024. In line with this objective, net working capital is the dependent variable; cash flow volatility from operations, investments, and financing are the independent variables; and leverage ratio and firm size are the control variables. First, the volatility of cash flow indicators is modeling using ARCH/GARCH and EGARCH models, and then the panel data analysis method is applied by including the obtained conditional variance series in the model. Based on the findings, operating cash flow uncertainty does not affect net working capital, while investment and financing cash flow uncertainty significantly negatively affects net working capital. In addition, it is found that leverage ratio and firm size also affect net working capital. The findings show that net working capital is shaped not only by operating performance, but also by investment and financing strategy uncertainty, debt structure, and growth dynamics.

This study investigates the relationship between cash flow volatility and leverage in Jordanian firms. The research purpose is to investigate whether cash flow volatility affects a company’s capital structure in Jordan. Panel data analysis is used in this study for a sample of 72 shareholder non-financial companies in Jordan from 2009 to 2020. The findings show that cash flow volatility has a significant link with leverage, indicating that companies with higher cash flow volatility tend to use more debt financing. In addition, the study finds that firm size, return on assets, and tangibility are positively associated with leverage, while growth is not significantly related. The study suggests that firms in Jordan should take cash flow volatility in consideration when making capital structure decisions. The study provides evidence that cash flow volatility is a vital determinant of leverage in Jordanian companies. The findings suggest that managers should consider the cash flow volatility effect on the capital structure alternatives of their firms. AcknowledgmentI want to thank Amman Arab University for its support.

Subject. This article discusses volatility of cash flows. Objectives. The article aims to develop a methodological approach to the application of data on the Bank of Russia Payment System cash flows volatility. Methods. For the study, I used the Hurst exponent calculated with fractal R/S analysis. Results. The application of the Hurst exponent allows to standardize the assessment of the cash flow volatility level taking into account the diversity in the economy. Conclusions. Based on the analysis of the dynamics of the Hurst exponent, it is possible to determine critical values and predict an economic crisis.

The research aims to analyses the capital structure applied in multinational companies for the effectiveness and efficiency of the company’s financing. This research uses independent variables i.e. business risk, asset growth, and cash flow volatility. The population of this research consists of all companies listed on the Indonesia Stock Exchange from year 2010-2019. The study took samples with the technical purposive sampling of multinational corporations that are non-financial institutions. Data analysis methods use multiple liner regression. The results showed that the capital structuring analysis was heavily influenced by business risk, asset growth, and cash flow volatility. That is, the company in determining the policy on managing the proportion of debt and equity as a source of funding the company can consider the condition of business risk, growth of assets, and volatility of cash flows owned by companies.

Credit default swaps and corporate performance smoothing

Managers use derivatives to reduce cash flow volatility and achieve earnings smoothing. In 1998, FASB issued SFAS No. 133, under which firms are no longer allowed to simultaneously record all offsetting gains and losses on the items being hedged. Thus, critics argued that this treatment could potentially induce volatility in earnings. The critics also argued that SFAS No. 133 would deter the use of derivatives. Consequently, cash flows were expected to become more volatile, which would also lead to increased volatility in earnings. Based on a sample of Fortune 500 firms, the current study documents that: (1) derivative usage did not significantly decline following the implementation of SFAS No. 133, and (2) derivative users' cash flow volatility did not increase. Although derivative users' earnings volatility did increase following the implementation of SFAS No. 133, the evidence suggests that this increase may have been caused by factors other than the new standard.

PurposeThe aim of the paper is to show how intelligence emanating from customer profitability analysis (CPA) can help improve strategic marketing planning. Insights into the profitability of individual customers, as well as the distribution of profitability across the customer base, can lead to better decisions in the areas of managing costs and revenues, managing risks and strategic market positioning.Design/methodology/approachThe concept and process of CPA are first explained. The heart of the paper then discusses how the outcomes permit novel analyses related to costs and revenues, risk, and strategic positioning. Finally, the paper explains what is needed to make the shift from retrospective CPA to prospective CPA.FindingsCPA delivers two types of insights: the degree of profitability for each individual customer, and the distribution of profitability among customers within the customer base. Profitability data at the level of the individual customer support better decision making about service levels, marketing investments and pricing strategies. The profitability distribution curve yields information about the vulnerability of future cash flows from customers. Further, DPA data permit segmentation and targeting on the basis of profitability and the development of different value propositions for different profitability segments.Practical implicationsShareholder value is created through cash flows from customers. CPA uncovers where these cash flows are generated. Armed with customer profitability data, marketers can really develop and implement value‐driven differentiated customer service strategies.Originality/valueWhile quite a number of published papers have discussed the technicalities of calculating customer profitability, this paper adds to the literature an overview of how the outcomes of such calculations can help planners make better decisions, to increase the magnitude of cash flows from customers and/or reduce the volatility and vulnerability of such cash flows.

The level of corporate cash flow management is related to the survival and development of enterprises and value creation. This study explores the impact mechanism of corporate cash flow management on profitability and empirically analyses a sample of Chinese A-share listed companies by constructing a fixed-effects regression model. The study finds that the level of cash holding has an inverted U-shaped relationship with corporate profitability; net cash flow from operating activities is significantly and positively related to corporate profitability; cash flow volatility has a negative impact on profitability; and improved cash turnover efficiency can effectively enhance corporate profitability. These results provide theoretical basis and practical guidance for enterprises to optimise cash flow management and enhance profitability.

Analysts seek to provide investors with an accurate picture of firm value using tangible and intangible criteria. Researchers use one intangible measure, corporate social responsibility (CSR), to proxy for the firm’s relationship with its stakeholders. The purpose of this paper is to advance research in two ways. First, we examine cash flow forecasts because they are less subjective than earnings forecasts. Second, we focus on a firm’s corporate social irresponsibility (CSIR) reputation formed through negative media coverage of environmental, social, and governance practices. Our paper posits that analysts are less likely to provide cash flow forecasts for a firm with a poor CSIR reputation. We conducted a study with 50,365 firm-year observations over twelve years. We support our hypothesis after controlling for endogeneity: The likelihood of analyst cash flow forecast issuance is associated negatively with firm negative media coverage. Additional analyses show that numerous firm and industry-related variables moderate this effect. This decrease in cash flow forecast issuance likelihood occurs, even if the poor CSIR reputation is from as long ago as three years prior or is due to environmental, social, or governance issues. Furthermore, increases in cash flow volatility and capital intensity positively moderate the likelihood of issuing a cash flow forecast, while increases in ROA and Tobin’s q negatively moderate the likelihood of issuing a cash flow.

This paper presents a study to measure the effects of return on investment, sales growth rate, volatility investment, cash flow and structure of institutional shareholders on the ratio of debt to equities. The study selects 102 firms listed on Tehran Stock Exchange and, using regression technique with Panel data, examines five different hypotheses over the period 2008-2012. The results indicate that there was a negative and meaningful relationship between return of investment and the ratio of debt to equities and a positive and meaningful relationship between sales growth and the ratio of debt to equities. Moreover, there were positive and meaningful relationships between volatility of investment as well as cash flow and the ratio of debt to equities. Finally, the survey has indicated that there was a negative and meaningful relationship between the structure of institutional shareholders and the ratio of debt to equities.

<p><b>The thesis consists of three empirical essays on corporate finance. In the first essay, we examine the influence of cash flow volatility on firms’ uses of debt maturity and zero-leverage policy in an international context. Using a large international sample, we find that cash flow volatility is positively associated with our measure of debt maturity at less than the 1% level of significance. Relative to unconditional means of debt maturity, a one standard deviation increase in cash flow volatility implies a 2.57% decrease in the probability of firms using long-term debt, a 5.83% increase in the probability of firms using only short-term debt, and an 11.8% increase in the probability of firms using zero-debt. Our results support the screening and the trade-off theories that firms with high cash flow volatility are screened out of the long-term debt market and firms with low cash flow volatility lengthen their debt maturity to moderate expected bankruptcy costs. We also find the qualitatively identical influence of cash flow volatility on debt maturity and zero-debt policy in both advanced and emerging economies.</b></p> <p>In the second essay, we investigate the two-directional relationship between venture capital investment and stock market development around the globe. We employ a two-stage generalized method of moments model using an instrumental variable approach to mitigate the potential reverse causality in this relationship across 19 countries from 1997 to 2015. We find that stock market development positively affects future venture capital investment. A one standard deviation increase in stock market capitalization leads to an 0.87% increase in future venture capital investment. Likewise, we find evidence that venture capital investment positively affects future stock market capitalization. However, this effect disappears with the presenceof stock market capitalization’s lags as explanatory variables in the model. Interestingly, we find that venture capital investments from 5 to 7 years are statistically significant and jointly associated with future stock market development at less than the 1% level, which is consistent with the venture capitalists harvestingtheir investments through initial public offerings 5 years or more after investing in a venture.</p> <p>In the last essay, we explore the influence of venture capital and private equity backing prior to initial public offerings on the listed U.S. firms’ financial policies. We find that, relative to the mean, venture-capital-backed firms have an 18.89% higher cash flow volatility, a 23.12% lower leverage, and a 36.76% higher likelihoodto follow a zero-leverage policy than non-venture-capital-backed firms. In contrast, we find the opposite effects for private equity-backed firms. We also find evidence that the negative effect of venture capital backing on capital structure persists after the initial public offering.</p>