Abstract
The goal of this paper is to investigate the impact of asymmetric ambiguity on corporate investment and financing strategies. Asymmetric information comes from the fact that insiders know the probability of the growth prospects of the firm while outsiders do not. Also, we assume that there are two types of firms (good and bad types) that differ in the quality of their forecasting of future cash flows. Our numerical simulations reveal that firms with more accurate forecasting of cash flows have an interest in speeding up investment in order to make it more difficult for bad firms to mimic their actions. Moreover, we show that the presence of asymmetric ambiguity leads to costly cash holding. These findings may help firms when making their investment and financing decisions under asymmetric ambiguity.
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