Cash Holdings Among Small Businesses

  title={Cash Holdings Among Small Businesses},
  author={Michael W. Faulkender},
  journal={Corporate Finance: Capital Structure & Payout Policies},
  • Michael W. Faulkender
  • Published 2002
  • Business
  • Corporate Finance: Capital Structure & Payout Policies
  • I examine the frictions of financial distress, information asymmetry, agency costs, and taxes and the effects they have on observed cash positions of small firms. Firms with higher costs of financial distress, as measured by the amount of research and development conducted by the firm, hold more cash. Firms with greater leverage tend to hold more cash for preventative purposes. Firms perceiving greater information asymmetries when they need money in the future hold more cash relative to firms… CONTINUE READING
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