All You Need Is Cash: Corporate Cash Holdings and Investment after the Global Financial Crisis
Christiane Kneer and
Neeltje Van Horen ()
No 9053, CESifo Working Paper Series from CESifo
Cash holdings at the onset of a financial crisis are a key determinant of investment by SMEs not only during the crisis but also during the recovery period. Cash-rich SMEs could maintain their capital stock during the global financial crisis, while cash-poor rivals reduced theirs. This gave cash-rich SMEs a competitive advantage during the recovery, resulting in a persistent and growing investment gap. The amplification effect was present for SMEs with both volatile and stable cash holdings and was particularly pronounced for younger and smaller firms. Competition dynamics and borrowing constraints seem to drive this amplification effect.
Keywords: SMEs; investment; cash holdings; financial crisis; misallocation (search for similar items in EconPapers)
JEL-codes: D22 E32 E44 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9053
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