What Determines the Composition of a Firm's Cash Reserves?

@article{Cardella2016WhatDT,
  title={What Determines the Composition of a Firm's Cash Reserves?},
  author={Laura Cardella and Douglas J. Fairhurst and Sandy J Klasa},
  journal={CGN: Risk Management},
  year={2016}
}
Although financial managers spend significant time and effort deciding in which financial assets corporate cash reserves should be invested, we know surprisingly little about the determinants of the variation in the composition of the financial assets that constitute these reserves. We find that firms invest more of their cash reserves in longer-maturity, less liquid securities that earn a higher yield if they can better forecast their short-term liquidity needs. Also, financially constrained… Expand
Precautionary Savings with Risky Assets: When Cash Is Not Cash
We show that U.S. industrial firms invest heavily in non-cash, risky financial assets such as corporate debt, equity, and mortgage-backed securities. Risky assets represent 40% of firms’ financialExpand
Interest Rates, Cash and Short-Term Investments
I document that two components of corporate liquid assets, cash and short-term investments, have followed strikingly different paths as a percent of assets since the 1970s. These patterns contrastExpand
Can Changes in the Cost of Carry Explain the Dynamics of Corporate 'Cash' Holdings?
Firms until recently were effectively constrained to hold liquid assets in non-interest-bearing accounts. As a result, the cost of capital of firms’ liquid-assets portfolios exceeded the return,Expand
Marketable Securities: Storage or Investment?
Corporate liquidity demand models view investments in marketable securities as a relatively simple store of excess liquidity (the storage view). However, compared to excess cash, marketableExpand
Corporate cash holdings: Causes and consequences
The considerable growth in corporate cash holdings around the world has prompted scholarly interest. Consequently, there is now a large academic literature examining cash holdings and their impact onExpand
Cash Reserves as a Hedge Against Supply-Chain Risk
Deregulation of the trucking industry and significantly lowered transportation costs led to large, widespread, and plausibly exogenous reductions in inventory for U.S. firms, with consequentExpand
Cash Reserves as a Hedge against Supply-Chain Risk
Deregulation of the trucking industry and significantly lowered transportation costs led to large, widespread, and plausibly exogenous reductions in inventory for U.S. firms, with consequentExpand
Collateral Constraints, Financial Constraints, and Risk Management: Evidence From Anti-Recharacterization Laws
We use the staggered enactment of anti-recharacterization laws as a plausibly exogenous shock to the value of securitizing collateral through Special Purpose Vehicles (SPVs) and test how collateralExpand
Impact of Financialization on Production Efficiency of China's Marine Companies
ABSTRACT Deng, J. and Liu, J., 2020. Impact of financialization on production efficiency of China's marine companies. In: Liu, X. and Zhao, L. (eds.), Today's Modern Coastal Society: Technical andExpand
Institutional and Legal Context in Natural Experiments: The Case of State Antitakeover Laws
We argue and demonstrate empirically that a firm's institutional and legal context has first‐order effects in tests that use state antitakeover laws for identification. A priori, the size andExpand
...
1
2
...

References

SHOWING 1-10 OF 73 REFERENCES
The Determinants and Implications of Corporate Cash Holdings
Abstract We examine the determinants and implications of holdings of cash and marketable securities by publicly traded U.S. firms in the 1971–1994 period. In time-series and cross-section tests, weExpand
The Cash Flow Sensitivity of Cash
We model a firm’s demand for liquidity to develop a new test of the effect of financial constraints on corporate policies. The effect of financial constraints is captured by the firm’s propensity toExpand
Corporate Financial Policy and the Value of Cash
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-quantitativeExpand
Precautionary Savings with Risky Assets: When Cash Is Not Cash
We show that U.S. industrial firms invest heavily in non-cash, risky financial assets such as corporate debt, equity, and mortgage-backed securities. Risky assets represent 40% of firms’ financialExpand
Liquidity Management and Corporate Investment During a Financial Crisis
This paper uses a unique dataset to study how firms managed liquidity during the financial crisis. Our analysis provides new insights on the interactions between internal liquidity, external funds,Expand
What Drives Corporate Liquidity? An International Survey of Cash Holdings and Lines of Credit
We survey chief financial officers from 29 countries to examine whether and why firms use lines of credit versus non-operational (excess) cash for their corporate liquidity. We find that these twoExpand
The effect of cash reserves on corporate investment and performance in industry downturns
We investigate whether large cash reserves are beneficial in industry downturns. In a sample of firms from industries experiencing a substantial decline in sales growth, we find that firms withExpand
Corporate Cash Reserves and Acquisitions
The acquisition behavior of cash-rich firms is examined for evidence of free cash flow-related behavior. A model of cash management is developed and used to identify a sample of cash-rich firms. TheExpand
Why Do Firms Hold so Much Cash? A Tax-Based Explanation
U.S. corporations hold significant amounts of cash on their balance sheets, and these cash holdings have been justified in the existing empirical literature by transaction costs and precautionaryExpand
Refinancing Risk and Cash Holdings
type="main"> We find that firms mitigate refinancing risk by increasing their cash holdings and saving cash from cash flows. The maturity of firms’ long-term debt has shortened markedly, and thisExpand
...
1
2
3
4
5
...