The Determinants and Implications of Corporate Cash Holdings

Tim Opler, Lee Pinkowitz, René Stulz and Rohan Williamson

No 6234, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the determinants and implications of holdings of cash and marketable" securities by publicly traded U.S. firms in the 1971-1994 period. Firms with strong growth" opportunities and riskier cash flows hold relatively high ratios of cash to total assets. Firms" that have the greatest access to the capital markets (e.g. large firms and those with credit" ratings) tend to hold lower ratios of cash to total assets. These results are consistent with the" view that firms hold liquid assets to ensure that they will be able to keep investing when cash" flow is too low relative to planned investment and when outside funds are expensive. The" short run impact of excess cash on capital expenditures, acquisition spending and payouts to" shareholders is small. The main reason that firms experience large changes in excess cash is" the occurrence of operating losses. There is no evidence that risk management and cash" holdings are substitutes.

Date: 1997-10
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Journal of Financial Economics, Vol. 52, no. 1 (April 1999): 3-46.

Downloads: (external link)
http://www.nber.org/papers/w6234.pdf (application/pdf)

Related works:
Journal Article: The determinants and implications of corporate cash holdings (1999)
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:nbr:nberwo:6234

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w6234

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().