Optimal Financing and Dividend Strategies with Time Inconsistency in a Regime Switching Economy

<figure class="figure-group responsive"><div class="sub-figure" id="a"><object data="https://static.hindawi.com/articles/complexity/volume-2019/8479503/figures/8479503.fig.001a.svgz" name="8479503.fig.001a" type="image/svg+xml"></object><div class="fig-label">(a) Firm value-capital ratio</div></div><div class="sub-figure" id="b"><object data="https://static.hindawi.com/articles/complexity/volume-2019/8479503/figures/8479503.fig.001b.svgz" name="8479503.fig.001b" type="image/svg+xml"></object><div class="fig-label">(b) Marginal value of cash</div></div><div class="sub-figure" id="c"><object data="https://static.hindawi.com/articles/complexity/volume-2019/8479503/figures/8479503.fig.001c.svgz" name="8479503.fig.001c" type="image/svg+xml"></object><div class="fig-label">(c) Investment-capital ratio</div></div><div class="sub-figure" id="d"><object data="https://static.hindawi.com/articles/complexity/volume-2019/8479503/figures/8479503.fig.001d.svgz" name="8479503.fig.001d" type="image/svg+xml"></object><div class="fig-label">(d) Investment-cash sensitivity</div></div></figure>

<p>Comparing state <svg height="8.8423pt" id="M301" style="vertical-align:-0.2064009pt" version="1.1" viewbox="-0.0498162 -8.6359 9.02496 8.8423" width="9.02496pt" xmlns="http://www.w3.org/2000/svg"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M673 297H417L411 270C517 261 522 258 506 183L487 92C476 38 428 19 360 19C207 19 123 132 123 287C123 472 243 631 441 631C557 631 617 583 617 469L647 472C650 545 655 604 658 632C625 643 554 666 467 666C201 666 23 502 23 278C23 90 156 -16 339 -16C410 -16 501 6 569 24C566 43 567 70 573 101L589 183C604 259 607 262 667 271L673 297Z"></path></g></svg> with state <span class="nowrap"><svg height="8.68572pt" id="M302" style="vertical-align:-0.0498209pt" version="1.1" viewbox="-0.0498162 -8.6359 7.94191 8.68572" width="7.94191pt" xmlns="http://www.w3.org/2000/svg"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M578 512C578 619 494 650 387 650H140L134 622C219 615 223 609 210 542L127 119C112 40 104 34 23 28L17 0H235C317 0 387 7 444 33C515 65 564 122 564 195C564 289 495 335 412 352V354C505 373 578 422 578 512ZM486 510C486 422 423 367 314 367H257L294 565C299 591 305 602 315 608C324 614 339 617 362 617C421 617 486 595 486 510ZM466 200C466 100 393 35 296 35C222 35 198 51 212 127L250 333H303C388 333 466 303 466 200Z"></path></g></svg>:</span> firm value-capital ratio and investment-capital ratio as well as their sensitivities.</p>

Complexity

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Figure 1

Figure 1: Optimal Financing and Dividend Strategies with Time Inconsistency in a Regime Switching Economy 