All you need is cash: corporate cash holdings and investment after the financial crisis

Andreas Joseph, Christiane Kneer (), Neeltje Van Horen () and Jumana Saleheen
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Christiane Kneer: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 843, Bank of England working papers from Bank of England

Abstract: Firms with high pre-crisis cash holdings invested significantly more than their cash-poor rivals during the global financial crisis and especially so during the recovery phase. This resulted in a persistent and growing investment gap between cash-rich and cash-poor firms. Cash especially benefited young and small firms and firms in industries where rivals became more financially constrained. The amplification effect of cash was absent in the period preceding the crisis. The ability to continue to invest allowed cash-rich firms to gain market share and accumulate more profits over the long-run. Having a liquid balance sheet when the credit cycle turns thus gives firms a competitive edge that lasts far beyond the crisis years.

Keywords: Firm investment; cash holdings; credit constraints; financial crisis (search for similar items in EconPapers)
JEL-codes: E22 E32 E44 G32 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2019-12-20
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: All You Need is Cash: Corporate Cash Holdings and Investment after the Financial Crisis (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0843

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