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Management Views on Corporate Cash Holdings

Gary Powell and H. Baker ()
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H. Baker: Kogod School of Business, American University

Discussion Paper Series from McColl School of Business, Queens University of Charlotte

Abstract: We survey the CFOs of 1,000 large U.S. companies to learn their views about corporate cash holdings. Specifically, we investigate managerial views about the determinants of cash holdings and whether they believe that corporate governance affects a firm’s level of cash holdings, spending of cash, and value of cash holdings. We find their views provide support for an optimal tradeoff approach to cash holdings, limited support for a financing hierarchy explanation, mixed support for arguments that financial constraints affect a firm’s cash holdings, and generally no support for most agency cost explanations. The survey results show that managers believe the effectiveness of a firm’s corporate governance structures may affect its cash holdings and spending of cash but not the value of its cash holdings.

Keywords: Cash Holdings; Corporate Governance (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010
New Economics Papers: this item is included in nep-bec
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Handle: RePEc:msb:wpaper:2010-01