 Cash holdings and risk-adjusted returns: The role of business strategy, life cycle, and managerial abilityDominic Gasbarro, Hong Miao, Robert G. Schwebach and J. Kenton Zumwalt International Review of Financial Analysis, 2025, vol. 105, issue C Abstract: This study explores the factors influencing firms’ cash holdings and their impact on shareholder returns. Firms are grouped into deciles based on Median Industry-Adjusted Cash Ratios (MACR). We examine the influence of market risk measures, operational and financial ratios, macroeconomic conditions, and key variables: business strategy, life cycle stage, and managerial ability. Our findings show that incorporating MACR with these variables improves the understanding of firm returns. ‘Prospector’ firms with high MACRs deliver strong excess returns, while ‘analyzer’ firms also outperform. Growth-phase firms with high MACRs show significant excess returns, while maturity-phase firms consistently perform well regardless of MACR. Managers with high ability generate excess returns at all MACR levels. Additionally, value-weighted portfolios outperform equally-weighted ones. Keywords: Cash holding; Deciles; Business strategy; Life cycle; Industry effect; Managerial ability; Return (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:105:y:2025:i:c:s1057521925004636 DOI: 10.1016/j.irfa.2025.104376 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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