Why Do U.S. Firms Hold So Much More Cash than They Used To?

Why Do U.S. Firms Hold So Much More Cash than They Used To?

  • THOMAS W. BATES
  • KATHLEEN M. KAHLE
  • RENÉ M. STULZ

Article first published online: 28th September 2009 DOI: 10.1111/j.1540-6261.2009.01492.x

Abstract


The average cash‐to‐assets ratio for U.S. industrial firms more than doubles from 1980 to 2006. A measure of the economic importance of this increase is that at the end of the sample period, the average firm can retire all debt obligations with its cash holdings. Cash ratios increase because firms' cash flows become riskier. In addition, firms change: They hold fewer inventories and receivables and are increasingly R&D intensive. While the precautionary motive for cash holdings plays an important role in explaining the increase in cash ratios, we find no consistent evidence that agency conflicts contribute to the increase.

Sign in to access the full article.

Related articles


Attracting Flows by Attracting Big Clients

  • LAUREN COHEN
  • BRENO SCHMIDT

Article first published online: 28th September 2009 / DOI: 10.1111/j.1540-6261.2009.01496.x

Read Article

Front Matter

Article first published online: 28th September 2009 / DOI: 10.1111/j.1540-6261.2009.01521_1.x

Read Article

The Relation between Price and Performance in the Mutual Fund Industry

  • JAVIER GIL‐BAZO
  • PABLO RUIZ‐VERDÚ

Article first published online: 28th September 2009 / DOI: 10.1111/j.1540-6261.2009.01497.x

Read Article

FELLOW OF THE AMERICAN FINANCE ASSOCIATION FOR 2009

  • Richard H. Thaler

Article first published online: 28th September 2009 / DOI: 10.1111/j.1540-6261.2009.01521_2.x

Read Article

Business Networks, Corporate Governance, and Contracting in the Mutual Fund Industry

  • CAMELIA M. KUHNEN

Article first published online: 28th September 2009 / DOI: 10.1111/j.1540-6261.2009.01498.x

Read Article

Role of Managerial Incentives and Discretion in Hedge Fund Performance

  • VIKAS AGARWAL
  • NAVEEN D. DANIEL
  • NARAYAN Y. NAIK

Article first published online: 28th September 2009 / DOI: 10.1111/j.1540-6261.2009.01499.x

Read Article

Are you an Author?


Please read our submission requirements and find out how to submit your paper to the Journal of Finance

Submit a paper