Why Do U.S. Firms Hold so Much More Cash than They Used to?

@article{Bates2006WhyDU,
  title={Why Do U.S. Firms Hold so Much More Cash than They Used to?},
  author={Thomas W. Bates and Kathleen M. Kahle and Ren{\'e} Stulz},
  journal={ERN: Firm Behavior (Topic)},
  year={2006}
}
The average cash to assets ratio for U.S. industrial firms increases by 129% from 1980 to 2004. Because of this increase in the average cash ratio, American firms at the end of the sample period can pay back their debt obligations with their cash holdings, so that the average firm has no leverage when leverage is measured by net debt. This change in cash ratios and net debt is the result of a secular trend rather than the outcome of the recent buildup in cash holdings of some large firms. It is… Expand
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