When does cash matter? Evidence for private firms

Paul Ehling and David Haushalter ()
Additional contact information
David Haushalter: Sheal college of business

No 1412, Working Papers from Banco de España

Abstract: Using a database of more than 180,000 private companies from 2000 to 2009, we find that the benefits of holding more cash vary substantially with a firm’s size and the conditions it faces. Cash holdings matter most for small firms: when there are negative shocks to industry or macroeconomic conditions, a small firm’s cash holdings are positively associated with changes in its sales and assets. Cash is less important for other conditions. Differences in the benefits of cash holdings between large and small firms are traced to a firm’s ability – and willingness – to increase leverage when there is a cash shortfall.

Keywords: cash holdings; benefits of cash holdings; private companies (search for similar items in EconPapers)
JEL-codes: G30 G32 G35 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2014-06
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1412

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