We show that business cycle dynamics and, in particular, the cyclicality of a firm's growth opportunities, determine the value of cash holdings. Cash is more valuable for firms with relatively more attractive growth opportunities in bad states of the business cycle. Cash holdings provide the...

We examine the market mispricing and limits-to-arbitrage hypotheses on the positive relation between cash holdings and expected stock returns. Using investor sentiment as a proxy for market mispricing, we find that returns of cash holding stocks are heavily influenced by investor sentiment....

This paper shows that the corporate life-cycle is an important dimension for the dynamics and valuations of cash holdings. Our results indicate that firms' cash policies are markedly interacted with their strategy choices. While firms in early stages and post-maturity stages hold large amounts...

We find that firms with higher cash-to-assets ratios obtain more patents and patent citations for a given amount of research and development expenditures. We propose that large cash reserves increase managerial incentives to innovate by reducing the risk to their career from undertaking...

Using a large sample of 2,712 unique U.S. domestic takeovers over the period 1993 to 2014, we show a negative relation between the level of cash holdings and post-announcement corporate bond returns. Our findings support the agency cost of cash holdings view and show that bondholders and...

The determinants of firm level cash holdings are well documented, yet relatively less is known about the influence of CEO characteristics on corporate liquidity decisions. We examine changes in cash holdings around CEO turnover events, a period in which discrete changes in managerial preferences...

Between 1970 and 2014 the federal funds rate soared from approximately 7.18% to 16.38%, and subsequently declined to 0.09%. Based on economic theory, corporate cash holdings should have moved inversely with these interest rate swings. Using a new measure of cash holdings and a random effects...

The wealth effect of limiting shareholder rights via anti-takeover provisions (ATPs) is a contentious issue. By taking the differential effect hypothesis perspective, our study aims to provide additional evidence about the relation between ATPs and acquisition performance.We examine the...

We analyze whether the organizational structure of firms (i.e., whether a firm is diversified or focused) affects their cash holdings. Using Compustat firm level and segment level data, we find that diversified firms hold significantly less cash than their focused counterparts. Our results are...

This study examines whether financial constraints and board governance play substitution roles in lowering agency concerns in corporate cash holdings. Using four firm-specific characteristics of financial constraints and 28 forward-looking board governance standards, we find that board...