Why Do U.S. Firms Hold So Much More Cash than They Used To?

Thomas W. Bates, Kathleen M. Kahle and René Stulz

Journal of Finance, 2009, vol. 64, issue 5, 1985-2021

Abstract: The average cash‐to‐assets ratio for U.S. industrial firms more than doubles from 1980 to 2006. A measure of the economic importance of this increase is that at the end of the sample period, the average firm can retire all debt obligations with its cash holdings. Cash ratios increase because firms' cash flows become riskier. In addition, firms change: They hold fewer inventories and receivables and are increasingly R&D intensive. While the precautionary motive for cash holdings plays an important role in explaining the increase in cash ratios, we find no consistent evidence that agency conflicts contribute to the increase.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (1042)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2009.01492.x

Related works:
Working Paper: Why Do U.S. Firms Hold So Much More Cash Than They Used To? (2007)
Working Paper: Why Do U.S. Firms Hold So Much More Cash Than They Used To? (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:64:y:2009:i:5:p:1985-2021

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().