This paper investigates how firm-bank relationships affect corporate cash-holding behavior. Using bank loan and financial statement data from emerging firms in Japan, we find that firms with concentrated bank relationships hold lower levels of cash. Additionally, firms with such bank...

Firms hold less cash (i.e. internal-liquidity) when their local bank branching network is dense. The effect strengthens for small, opaque and financially constrained firms. Further, it weakens with distance and strengthens with urban vibrancy. Finally, firms located in dense local branch...

Why do U.S. firms hold much more cash now than they did 40 years ago? I construct a partial equilibrium model of firm dynamics where cash provides a buffer against persistent and transitory cash flow shocks in the presence of costly external finance. I find that 57% of the increase in cash...

This paper examines the role of cross credit rating changes on corporate cash holdings policies, focusing on the "big three" credit rating agencies (Standard and Poor's, Fitch and Moody's). Using a hand collected sample of credit ratings for firms listed at the S&P500 we initially verify the...

We empirically examine how corporate cash holdings relate to debt structure, that is, the fraction of bond financing. We find that the relation between cash holdings and bond financing is U-shaped in the cross-section of firms. That is, firms that do not use bond financing or those that are...

The Lehman Brothers event in 2008 created a large uncertainty shock that triggered an economic slowdown lasting a decade. The macroeconomic effects are well documented, but the effect on business decisions much less so. In this paper, we explore corporate data to investigate how economic...

Rising intangible assets on corporate balance sheets around the world could limit borrowing capacity and consequently hinder growth if firms must preserve cash and forgo investment opportunities. We show that financial development lowers the sensitivity of cash holdings to tangible assets and...

Cash holding is on average more valuable when firms are managed by overconfident CEOs. Economically, having an overconfident CEO on board is associated with an increase of $0.28 in the value of $1.00 cash holding. The positive effect of CEO overconfidence on the value of cash concentrates among...

Contrary to prior evidence, we show that corporations don't necessarily follow a systematic trade-off between cash holdings and risk management policies and that cash holdings are not a viable substitute for hedging using derivative instruments. Most importantly, we document an economically...

We examine whether firms hold more cash in the face of tax uncertainty. Because of gray areas in the tax law and aggressive tax avoidance, the total amount of tax that a firm will pay is uncertain at the time it files its returns. The tax authorities can challenge and disallow the firm's tax...