Firm Selection and Corporate Cash Holdings

Berardino Palazzo and Juliane Begenau
Additional contact information
Juliane Begenau: Harvard Business School

No 1047, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper proposes a novel explanation for the secular increase in the cash holdings of public U.S. firms. We show that this fact results from a change in the composition of firms. Since the end of the 70s, the proportion of new economy firms that engage in R&D has increased dramatically. These types of firms enter the Compustat sample with more cash holdings. In contrast, old economy firms' cash holdings have remained stable over time. We use a firm industry model with endogenous entry in the stock market to explore three competing hypothesis: 1) a structural change in the composition of U.S. firms; 2) lower entry costs/better IPO conditions for new economy firms; 3) institutional reasons such as a change in the tax benefit of R&D activities.

Date: 2015
New Economics Papers: this item is included in nep-dge and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2015/paper_1047.pdf (application/pdf)

Related works:
Journal Article: Firm selection and corporate cash holdings (2021)
Working Paper: Firm Selection and Corporate Cash Holdings (2017)
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:red:sed015:1047

Access Statistics for this paper

More papers in 2015 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().