Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/39801 
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dc.contributor.authorBroll, Udoen
dc.contributor.authorWong, Keith K.P.en
dc.date.accessioned2010-06-08-
dc.date.accessioned2010-09-09T09:45:47Z-
dc.date.available2010-09-09T09:45:47Z-
dc.date.issued2010-
dc.identifier.urihttp://hdl.handle.net/10419/39801-
dc.description.abstractThis paper examines the interplay between the real and financial decisions of the competitive firm under output price uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk attitude of the firm and the incidence of the underlying uncertainty. We further show that the firm's optimal input mix depends on its optimal debt-equity ratio, thereby rendering the interdependence of the real and financial decisions of the firm. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences so as to ensure that the firm's optimal output is adversely affected upon the introduction of the background risk.en
dc.language.isoengen
dc.publisher|aTechnische Universität Dresden, Fakultät Wirtschaftswissenschaften |cDresdenen
dc.relation.ispartofseries|aDresden Discussion Paper Series in Economics |x04/10en
dc.subject.jelD21en
dc.subject.jelD81en
dc.subject.jelG32en
dc.subject.ddc330en
dc.subject.keywordBackground risken
dc.subject.keywordCapital structureen
dc.subject.keywordPrice uncertaintyen
dc.subject.stwKapitalstrukturen
dc.subject.stwEntscheidung bei Unsicherheiten
dc.subject.stwFinanzierungstheorieen
dc.subject.stwPreisen
dc.subject.stwRisikoen
dc.subject.stwTheorieen
dc.titleThe firm under uncertainty: capital structure and background risk-
dc.type|aWorking Paperen
dc.identifier.ppn627496423en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:tuddps:0410en

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