Bart Lambrecht
Bio sketch: Bart Lambrecht is a professor of finance at Lancaster University. His research is in the areas of corporate finance and household finance covering topics such as mergers and acquisitions, corporate bankruptcy, real options, corporate governance, capital structure, dividend policy, mortgage default and repossession. Bart Lambrecht has a BA in applied economics from the University of Antwerp (UFSIA). He did his graduate studies at the University of Cambridge where he obtained an MPhil in Finance and a PhD in Economics. Prior to joining the University of Lancaster in 2003 as a finance professor, he was a lecturer and senior lecturer at the University of Cambridge. Bart Lambrecht has held visiting positions at the University of Calgary (2001), UCLA (2002) and MIT (2009).
Abstract: We develop a model where payout, investment and financing decisions are made by managers who attempt to maximize the rents they take from the firm. But the threat of intervention by outside shareholders constrains rents and forces rents and payouts to move in lockstep. Managers are risk-averse, and their utility function allows for habit formation. We show that payout follows Lintner’s (1956) target-adjustment model. We provide closed-form, structural expressions for the payout target and the partial adjustment coefficient. Risk aversion causes managers to underinvest, but habit formation mitigates the degree of underinvestment. Changes in corporate borrowing absorb fluctuations in earnings and investment.
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