(Non-)Precautionary Cash Hoarding and the Evolution of Growth Firms

Arnoud Boot and Vladimir Vladimirov ()
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Vladimir Vladimirov: University of Amsterdam, Finance Group, 1018TV Amsterdam, Netherlands

Management Science, 2019, vol. 65, issue 11, 5290-5307

Abstract: We analyze whether growth firms should delay current investment to hoard cash in order to reduce dilution from external financing. This hoarding motive is the natural counterpart to saving cash as a precaution to help secure funding for future investment opportunities. However, the two motives lead to fundamentally different implications for hoarding and for how cash interacts with key financial and investment decisions. In particular, our paper contributes to understanding why firms choosing private over public financing hoard less, and why product market competition has an ambivalent impact on the public–private choice.

Keywords: cash hoarding; growth firms; public versus private financing; competition; real options (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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https://doi.org/10.1287/mnsc.2018.3079 (application/pdf)

Related works:
Working Paper: Non-Precautionary Cash Hoarding and the Evolution of Growth Firms (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:65:y:2019:i:11:p:5290-5307

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