Financial Conservatism, Capital Structure & their impact on Firm Value

This book differentiates financially conservative firms from non-conservative firms and investigates how financially conservative and capital structure policies affect their firm values. A firm is said to be financially conservative if it has high cash holdings as a protection against future financial constraints. Using two samples of UK and Italian firms from 1995 to 2013, I have provided evidence that financially conservative firms, even though are cash rich and / or have low levels of debt, do not have the highest firm values due to the effects of tax shield associated with interest on debt. A detailed comparison has been made between active UK and Italian firms to illustrate this.