Corporate finance.
Explain the three theories of cash holdings including: trade-off theory,pecking order theory and agency conflict theory.
Based on the empirical evidence in Faulkender and Wang (2006) and Dittmar and Mahrt-Smith (2007), discuss the relationship between the value of cash holdings and corporate characteristics, including corporate leverage, cash reserves, financial constraints and the quality of corporate governance.
What is a credit rating game model? What does the credit rating game model imply about the quality of credit rating?(40 marks)
Discuss how CRAs can monitor and discipline corporate managers with their credit watch procedure. Your discussion should be supported by the theory of credit watch in Boot et al. (2006) and the empirical evidence in Bannier and Hirsch (2010).