Using a customer–supplier matched sample of US-listed firms from 1980 to 2016, we study the corporate cash-holding relationship between suppliers and their major customers. The key findings suggest that levels are positively affected by those customers, consistent with liquidity argument. effects more pronounced when customers in favourable financial conditions they considered important supplie...

Academics, politicians, and journalists are often highly critical of U.S. firms for holding too much cash. Cash holdings are stockpiled free-cash flow and incur substantial opportunity costs from the perspectives of economics. However, behavioral theory highlights the benefits of cash holdings as fungible slack resources facilitating adaptive advantages. We use the countervailing forces embodie...

Liquidity and Capital Structure* This paper solves for a firm's optimal cash holding policy within a continuous time, contingent claims framework that has been extended to incorporate most of the significant contracting frictions that have been identified in the corporate finance literature. Under the optimal policy the firm targets a level of cash holding that is a non-monotonic function of bu...

The purpose of this study is to obtain empirical evidence whether firm size has positive impact on cash holding, liquidity negative flow volatility and growth opportunity holding for manufacturing companies in Indonesia. sampling technique used was purposive Eviews 12 SV Microsoft Excel 2010 data processing. Research during the 2017-2019 period 77 then performed outliers which reduces number 63...

We introduce a post-entry liquidity constraint to the standard model of a …rm with serially correlated pro…tability and an irreversible exit decision. We assume that …rms with no cash holdings and negative cash ‡ow must either exit or raise new cash at a transaction cost. This creates a precautionary motive for holding cash, which must be traded o¤ against the liquidity cost of holding cash. We...

We analyze the risk characteristics and the valuation of assets in an economy in which the investment opportunity set is described by the real interest rate and the maximum Sharpe ratio. It is shown that, holding constant the beta of the underlying cash flow, the beta of a security is a function of the maturity of the cash flow. For parameter values estimated from U.S. data, the security beta i...