Financial Constraints, Investment, and the Value of Cash Holdings

  title={Financial Constraints, Investment, and the Value of Cash Holdings},
  author={David J. Denis and Valeriy Sibilkov},
  journal={Corporate Finance: Valuation},
Previous studies report that cash holdings are more valuable for financially constrained firms than for unconstrained firms. We examine (i) why this is so and (ii) why some constrained firms appear to hold too little cash. Our results indicate that greater cash holdings are associated with higher levels of investment for constrained firms with high hedging needs and that the association between investment and value is stronger for constrained firms than for unconstrained firms. These findings… 

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