The impact of competition and time-to-finance on corporate cash holdings

Mark Raun Moritzen and Alexander Schandlbauer

Journal of Corporate Finance, 2020, vol. 65, issue C

Abstract: This paper empirically documents how the interaction between competition and time frictions in capital markets impacts firms' cash management decisions. Using the introduction of the U.S. Securities Offering Reform in 2005 as a quasi-natural experiment, we show that a shorter time-to-finance leads to a reduction in corporate cash holdings. This effect is significantly stronger for firms that are exposed to preemption risk. Furthermore, patents mitigate the risk of preemption and the effect of a reduction in time-to-finance on cash holdings is strongest for unconstrained firms.

Keywords: Cash holdings; Time-to-finance; Competition; Real investment; Capital market frictions (search for similar items in EconPapers)
JEL-codes: G30 G32 G35 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:65:y:2020:i:c:s0929119919300744

DOI: 10.1016/j.jcorpfin.2019.101502

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