IDEAS home Printed from https://ideas.repec.org/a/wri/journl/v31y2008i1p43-71.html
   My bibliography  Save this article

The Impact of Cash Flow Volatility on Systematic Risk

Author

Listed:
  • Nicos A. Scordis
  • James Barrese
  • Ping Wang

Abstract

Where information is costly, volatile cash flows create information acquisition costs that reduce value. Thus, managers act to reduce their firm’s volatility of cash flow in anticipation of higher value for shareholders. However, when managers reduce the firm’s cash flow volatility, they also affect the systematic risk of their firm’s stock. The direction of the relationship between cash flow volatility and systematic risk depends on the relative value of the firm’s growth opportunities in relation to the firm’s assets-in-place. We use a panel sample of 542 observations from United States insurance firms to investigate the relationship between cash flow volatility and systematic risk. The direction of the relationship between cash flow volatility and systematic risk has implications both for the education and for the practice of risk management. We make recommendations for risk management programs.

Suggested Citation

  • Nicos A. Scordis & James Barrese & Ping Wang, 2008. "The Impact of Cash Flow Volatility on Systematic Risk," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 31(1), pages 43-71.
  • Handle: RePEc:wri:journl:v:31:y:2008:i:1:p:43-71
    as

    Download full text from publisher

    File URL: http://www.insuranceissues.org/PDFs/311SBW.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicos Scordis, 2011. "The Morality of Risk Modeling," Journal of Business Ethics, Springer, vol. 103(1), pages 7-16, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:31:y:2008:i:1:p:43-71. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.