Corporate Financial Policy and the Value of Cash

  title={Corporate Financial Policy and the Value of Cash},
  author={Michael W. Faulkender and R. Wang},
  journal={Journal of Finance},
  • Michael W. Faulkender, R. Wang
  • Published 2006
  • Economics
  • Journal of Finance
  • We examine the cross-sectional variation in the marginal value of corporate cash holdings that arises from differences in corporate financial policy. We begin by providing semi-quantitative predictions for the value of an extra dollar of cash depending upon the likely use of that dollar, and derive a set of intuitive hypotheses to test empirically. By examining the variation in excess stock returns over the fiscal year, we find that the marginal value of cash declines with larger cash holdings… CONTINUE READING
    1,126 Citations

    Tables from this paper

    The Effect of Financial Constraints, Investment Policy, Product Market Competition and Corporate Governance on the Value of Cash Holdings
    • 29
    • Highly Influenced
    Capital Market Conditions and the Financial and Real Implications of Cash Holdings
    • Highly Influenced
    • PDF
    Firms' Cash Holdings and the Cross-Section of Equity Returns
    • 14
    • PDF
    The shareholder value of excess cash
    • Highly Influenced
    • PDF
    Analysts and Corporate Liquidity Policy
    • 5
    • Highly Influenced
    • PDF
    Can Changes in the Cost of Cash Resolve the Corporate Cash Puzzle
    • 11
    • Highly Influenced
    • PDF
    What Drives Corporate Liquidity ?
    • 26
    • PDF


    The Determinants and Implications of Corporate Cash Holdings
    • 2,664
    • Highly Influential
    • PDF
    The Cash Flow Sensitivity of Cash
    • 2,229
    • Highly Influential
    • PDF
    Financing Constraints and Corporate Investment
    • 5,375
    • PDF
    Corporate Cash Reserves and Acquisitions
    • 1,579
    Asset liquidity, debt covenants, and managerial discretion in financial distress:
    • 62
    • PDF