This study aims to investigate the impact of deviation from optimal level of cash holdings on adverse selection and moral hazard problems. The data set includes 106 listed firms of Tehran Stock Exchange during the period of 2005-2016 and both panel data and cross-sectional data multivariate regressions were utilized in different stage of analysis to test the hypotheses. According to the optimal...

C urrently U.S. corporations have record-high cash holdings. Many argue that this phenomenon is related to the sluggish recovery of the economy: Firms holding more cash are investing less, and this prevents the economy from taking off. While referring to the cash holdings of Apple, the president of a business association stated “Why wasn’t Apple spending that money on expansion, new products an...

cash is a critical source for business enterprises and creating balance between available cash and the required cash is the most important factor concerning the economic viability of a business enterprise. both of the companies that do not hold enough cash or hold too much cash, face too much problems. this paper investigates the impact of deviation from the estimated optimal cash level on firm...

We investigate the determinants of cash holdings and firm value of Latin American firms during the Mexican crisis of 1994-1995 and the Brazilian crisis of 1999. We find that each crisis alters the determinants of cash and firm value differently. Larger firms increase their cash holdings during the Mexican crisis, while cross-listed firms increase their holdings of cash during the Brazilian cris...

Using variations in local real estate prices as exogenous shocks to corporate financing capacity, we investigate the causal effects of financial flexibility on cash policies of US firms. Building on this natural experiment, we find strong evidence that increases in real estate values lead to smaller corporate cash reserves, declines in the marginal value of cash holdings, and lower cash flow se...

In this paper, we provide new and complementing international evidence on the relation between cash holdings, corporate governance, and firm value. Our sample consists of a crosssection of 1,875 firms from 46 countries in 2007. We construct eight different measures of firm-level corporate governance based on 64 individual governance attributes provided by Governance Metrics International (GMI)....

Although a firm’s use of shorter-term debt can potentially help it to reduce agency costs of debt and align managers’ interests with those of shareholders, the use of this type of debt increases the firm’s refinancing risk. We hypothesize that firms with debt that has a shorter maturity hold larger cash reserves to reduce important costs they could incur if they have difficulty refinancing thei...

Firm cash holdings increased substantially from 1980 to 2013. The overall distribution of firm cash holdings changed in the same period. We study the implications of these changes for monetary policy. We use Compustat data and a model with financial frictions that allows the calculation of the monetary policy effects according to the distribution of cash holdings. We find that the interest rate...

We investigate the financial and real implications of corporate cash holdings over different capital market conditions in the period 1972-2008. A recent theoretical work implies that the value of corporate liquidity varies with the supply of external capital and should be higher during market-wide liquidity shocks. We find that for an average firm a marginal dollar in cash holdings has the same...