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What Do We Know AboutCorporate Cash Holdings?A Systematic Analysis

Alethéia Ferreira da Cruz, Herbert Kimura and Vinicius Amorim Sobreiro

INTRODUCTION

Cash holdings play animportant role at the heart offirms’ policies. In fact, holdingcash is the most common wayfor firms to ensure liquidity(Almeida, Campello, Cunha, &Weisbach, 2014). Cash reservesallow firms to respond to unex-pected changes in cash flows,to fund daily operations, tofinance long-term investment,and to hedge risk (Acharya,Almeida, & Campello, 2007;Almeida, Campello, &Weisbach, 2004; Bates,Kahle, & Stulz, 2009; Opler,Pinkowitz, Stulz, &Williamson, 1999).

Because cash represents avaluable and strategic asset(Haushalter, Klasa, &Maxwell, 2007; Kim & Bettis,2014), comprehending cashpolicy is a relevant issue if wewant to enhance and refine ourknowledge regarding firmvalue, corporate investmentand financing choices (Almeidaet al., 2014) and to understand

its implications for corporateprofitability, risk, and eco-nomic growth (Acharya,Almeida, Ippolito, & Perez,2014; Campello, Giambona,Graham, & Harvey, 2011;Graham & Leary, 2016). Inthis regard, three related factshave contributed to strengthenthe importance of cash hold-ings in the corporatefinance field.

First, a dramatic increasein cash reserves has beennoticed in both U.S. firms andfirms abroad in recent years(Almeida et al., 2014; Bates,Chang, & Chi, 2018; Cole,2014; Le Guyader, 2012; Mar-cum, Martin, & Strickland,2011; Marcum, Martin, &Strickland, 2012; Orlova &Rao, 2018; Phan, Nguyen,Nguyen, & Hegde, 2019;Prescott, 2015). Among non-financial S&P 500 firms, cashholdings increased fivefoldfrom 1996 to 2012, reaching$1,334 billion (Almeida et al.,2014). Not only absolute but

also relative values of cashholdings have experienced aconsistent growth all over theworld, Chen, Dou, Rhee,Truong, and Veeraraghavan(2015) cite a study from theInternational Institute ofFinance that estimated corpo-rations in the United States,Euro Zone, the United King-dom, and Japan to hold $7.75trillion in cash or cash equiva-lent. The authors also find thatthe median cash to total assetratios varied over the period1989–2009: from 2.3% forNew Zealand to 3.6% forRussia, 5.2% for Australia,8.0% for Finland, 10.1% forSweden, 13.7% for Singapore,and 16.6% for Hong Kong.Focusing on two differenttimes in a 20-year windowusing Compustat Global Data,we confirm this upward trendfor cash-holding ratios aroundthe world, as shown inExhibit 1, Cash ratio average(percentage) across the worldin 1994 and 2013.

© 2019 Wiley Periodicals, Inc.Published online in Wiley Online Library (wileyonlinelibrary.com).DOI 10.1002/jcaf.22368 77

Second, cash holdings areclosely related to firms’ financ-ing choices. As a financinginstrument, cash holdings canbe used to undertake profitableinvestment opportunities(Ferreira & Vilela, 2004), toreduce the cost of accessingexternal financing (Almeidaet al., 2004), to service debt dur-ing economic distress (Acharyaet al., 2007), and to serve as aresource during difficult times(Campello et al., 2011).

Third, cash holdings arealso linked to risk managementstrategy. As a risk managementtool, cash might reduce cashflow volatility and consequentlymitigate financial risks thatcould affect a firm’s futureprofits (Acharya et al., 2007).

Nonetheless, holding cash is notcostless due to the presence oftransaction costs such as taxesand flotation fees, implying thevalue of maintaining cash(Faulkender & Wang, 2006).

Moreover, if cash is used toprotect against future shortfalls,firms might bypass interestinginvestment opportunities, par-ticularly when facing financingconstraints (Almeida et al.,2004; Bates et al., 2009).Supporting this view, Almeidaet al. (2004) shed light on thecash holdings sensitivity to cashflows when a firm faces finan-cial constraints. If a firm isfinancially constrained, it mayhave to incorporate savingsfrom incremental cash flowsto protect its future. As a

result, the firm might hold aconsiderable portion of cash asa hedging tool for downturns.

In the cash holdings litera-ture, some researchers focus onwhy firms hold cash, how firmsemploy cash in corporate deci-sions and what the real conse-quences of corporate cashchoices are.

Interest in corporate cashholdings extends back at leastas far as Keynes (1936). Nota-bly, growth has occurred in theliterature since the mid-1990s,when cash holdings became anactive topic in liquidityresearch, as shown in Exhibit 2,Papers published by year.

Although a considerablebody of work has been pro-duced, there remains a lack of

Exhibit 1

Cash Ratio Average (%) Across the World in 1994 and 2013.

Aust

rali

a

Au

stri

a

Bel

giu

m

Bra

zil

Chil

e

Chin

a

Den

mar

k

Fin

land

Fra

nce

Ger

man

y

Gre

ece

Ho

ng

Ko

ng

India

Indones

ia

Irel

and

Isra

el

Ital

y

Jap

an

Luxem

bourg

Mal

aysi

a

Mex

ico

Mo

rocc

o

Net

her

lands

New

Zea

land

Nig

eria

No

rway

Pak

ista

n

Phil

ippin

es

Po

lan

d

Port

ugal

Sau

di

Ara

bia

Sin

gap

ore

So

uth

Afr

ica

So

uth

Ko

rea

Spai

n

Sri

Lan

ka

Sw

eden

Sw

itze

rlan

d

Tai

wan

Thai

land

UK

Ven

ezuel

a

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

34

32C

ash

ratio

ave

rage

: cas

h an

d eq

uiva

lent

s/tot

al a

sset

s (%

)1994

2013

The Journal of Corporate Accounting & Finance / January 201978

DOI 10.1002/jcaf © 2019 Wiley Periodicals, Inc.

research that compiles and sys-tematizes the available knowl-edge on cash holdings. Thus,understanding and mapping thedebate on corporate cash hold-ings may provide better insightabout the direction for researchand help to identify potentialgaps. We therefore focus on twomain questions: What do weknow about cash holdings?What are the main insights onwhich to focus regarding futureresearch on cash holdings?

To address these questions,we present a systematic literaturereview of nearly 290 papers pub-lished from 1997 to 2017,pinpointing the most relevantarticles on cash holdings andidentifying major gaps in thecurrent literature following LageJunior and Godinho Filho

(2010), Seuring (2013), andJabbour (2013)’s methodology.

The remainder of the paperis organized as follows.Section 2 describes the researchdesign, highlighting themethod, and the database ofscientific papers investigated inour review (e.g., Scopus, Webof Science, etc.). Section 3 pro-vides the main approaches oncorporate cash holdings.Section 4 delineates the fea-tures of the analyzed articles,including papers cited mostoften, scholar networks, andthe research pathway on cashholdings. In Section 5, researchgaps are identified and sugges-tions are made regarding ave-nues for future research.Section 6 presents the conclud-ing remarks.

RESEARCH DESIGN

Following the methods ofLage Junior and GodinhoFilho (2010), Seuring (2013),and Jabbour (2013) for the pro-posed literature review andresearch agenda, we performeda wide search of publishedpapers from 1997 to 2017 indifferent academic journaldatabases, including Scopus,Wiley, Web of Science (WOS),Academic Search CompletePLUS (Ebsco), JSTOR,Taylor & Francis, Emerald, andSpringer. This methodologyallowed us to track the evolu-tion and the main contributionsof the cash holding researchand to identify challenges andinsights for future research inthe field. We focused on

Exhibit 2

Papers Published by Year.

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

5

10

15

20

25

30

35

40

45

50

55

60

65

Num

ber

of p

aper

s

The Journal of Corporate Accounting & Finance / January 2019 79

© 2019 Wiley Periodicals, Inc. DOI 10.1002/jcaf

theoretical and empirical arti-cles that have been publishedon cash holdings over time.

Although the studies ofAlmeida et al. (2014) andAmess, Banerji, and Lampousis(2015) have respectivelyattempted to present a literaturereview on corporate liquiditymanagement and precautionaryand agency reasons to holdcash, extensive research on cashholdings that highlights links,attributes, and core debates oncash holdings remains to beaddressed. We also identify agap left by Almeida et al.(2014) by considering the liquid-ity literature regarding estimatesof the value of cash and the realconsequences of holding cash.

We first browse all avail-able papers on cash holdingsusing the keywords “cash,”“cash ratio,” “cash holdings,”“corporate cash reserves,”“cash management,” “liquidassets,” and “corporate liquid-ity” in the databases, collectingand analyzing the articlesbetween December 2016 andJune 2017. This search revealedthat 290 papers were publishedin the period from 1997 to June2017. Of these, 144 papers pub-lished in journals with animpact factor of 1 or greaterwere selected to assess the evo-lution of and linkages amongresearch topics related to corpo-rate cash holdings. These paperswere then coded and analyzedaccording to the 10 categoriesshown in Exhibit 3, Main cate-gories of survey analysis.

Category 1 introduces thepaper’s main approach thatwas identified from the key-words, abstract and introduc-tion and was coded on a scalefrom A to F. Category 2 refersto the methodology employedin each paper, which was codedon a scale from A to F. In

Category 3, the statisticaltool/data analysis was codedon a scale from A toE. Category 4 presents theposition of the cash holdingsvariable in the empirical model,coded on a scale from AtoD. Category 5, which relates tothe variables source used in theanalysis, was coded on a scalefrom A to G. Categories 6, 7,and 8 were associated with thestudy level, context and timeanalysis, respectively, coded ona scale from A to G. Finally,categories 9 and 10 classify thetheoretical perspective used bythe authors (scale A to E) andtheir findings (scale A to F),respectively.

Exhibit 4, Data classifica-tion and categorization foreach paper, lists the data classi-fication and categorization foreach paper. The descriptive sta-tistics for each category areestimated and evaluated con-currently with the papercontent.

After coding the articles,we develop a summary thatincludes goals, primary conclu-sions, contributions, and limi-tations for each paper, aspresented in Exhibit 5, Papergoal, main conclusions, contri-butions, and limitations. Thearticles are arranged in alpha-betical order according to thesurname of the first author. Itis important to highlight thatall paper limitations have beennoted by the authorsthemselves.

APPROACHES REGARDINGCASH HOLDINGS: A BRIEFOVERVIEW

Comprehending the reasonsfirms hold cash, the effects ofcash holdings on corporatedecisions, and the cashdynamic inside firms has

become increasingly relevant tocorporate finance research andpractice. To address theseissues, the next section presentsthe main approaches related tocash holding research, includ-ing the optimal cash level, themotivations of holding cash,the determinants of cash hold-ings, the value of cash hold-ings, and the sensitivityof cash.

The Optimal Cash Level

Models on the optimallevel of cash have been widelydiscussed and applied to sup-port theoretical insights andempirical findings on cashholdings behavior. Earlier cashholdings optimization modelswere discussed by Baumol(1952), Tobin (1956), Millerand Orr (1966), Archer (1966),Daellenbach (1974), and Budinand Handel (1975). However,optimization models have con-siderably evolved over time.For instance, Kim, Mauer, andSherman (1998) develop amodel of optimal cash holdingbased on a cost benefit-trade-off between the cost of carryingcash and the benefit of takingfuture investment opportunitiesvia internal funds. Specifically,the authors predict that theoptimal investment in cashreserves is positively related tothe cost of external financing,the uncertainty of expectedcash flows, and the return oninvestment opportunities, andnegatively associated with size,investment in physical assets,and financial distress.

In Riddick and Whited(2009), optimal cash policyrelies on the cost of externalfinance and future financingneeds. In this setting, firmshold a higher level of precau-tionary cash holdings when



Exhibit 3

Main Categories of Survey Analysis

Order Category Subcategory1 Main focus A—Determinants and antecedentes of cash holdings

B—Value of cash holdingsC—Precautionary, transaction cost, and/or speculative(investment opportunities) motives of excess cashD—Agency conflictsE—Financial constraints and credit supply shocksF—Sensitivity of cash to cash flow and/or to investment

2 Method A—Conceptual/theoreticalB—Quantitative (empirical and mathematical model)C—QualitativeD—Quantitative/qualitative or qualitative/quantitativeE—CasesF—Survey

3 Statistical tool/data analysis A—Mathematical modelingB—Standard econometricC—Computational methodD—Multivariate analysisE—Not applicable

4 Position in analytical model A—Dependent variableB—Independent variableC—Used to construct other variableD—Not applicable

5 Variable source A—From balance sheetB—From marketC—Macroeconomic variablesD—Exogenous variablesE—Primary dataF—OthersG—Not applicable

6 Level of analysis A—CountryB—Business group/conglomerateC—Sector/industryD—FirmE—OthersF—Not applicable

(Continues)



external financing is costly orincome uncertainty is high.Palazzo (2012) notes that theoptimal cash-holding policydepends on the trade-offbetween the dividend distribu-tion decision in the present andthe cash reserve to prevent thehigh costs of future externalfinancing.

Almeida, Campello, andWeisbach (2011) focus on theoptimality of corporate finan-cial policies and the potentialcosts of external finance in thefuture, predicting that firmshave a propensity to allocatefunds to safer and more liquidassets (e.g., cash) in the pres-ence of financial constraints.Conversely, by relaxing currentand future financing

constraints, the model foreseesthat firms might invest in risk-ier and more illiquid assets.

Hugonnier, Malamud, andMorellec (2014) suggest thatfirms must simultaneouslymake three interrelated deci-sions regarding their cash-holding policy, investmenttime, and financing funds toobtain optimal cash levels. Inthis setting, Hugonnier et al.(2014) assume that firms facingcapital supply constraints haveless ability to raise externalfunds and tend to hold morecash to protect themselvesagainst default risk. However,as cash is considered an assetwith a lower return, firmsmight choose a target level forcash holdings that allows them

to distribute dividends or tokeep earnings and pursueinvestments, depending on therelationship between cash hold-ings and target levels.

Motivations for Holding Cashand Equivalents

Firms might maintain cashfor numerous purposes. Trans-action motives, speculativemotives, precautionary reasons,taxes, agency conflicts andincentives, financial constraints,diversification, defensive strate-gies, and product market com-petitiveness are the mainexplanations presented over thepast years by researchers.

The transaction motive isrelated to business operational

Order Category Subcategory7 Study context A—World

B—USA/CanadaC—EuropeD—Asia/OceaniaE—Latin AmericaF—AfricaG—Not applicable

8 Analysis period A—More than 10 yearsB—Between 5 and 10 yearsC—Between 3 and 5 yearsD—Less than yearsE—Not applicable

9 Theoretical perspective A—Trade-off theoryB—Packing order theoryC—Agency-based theoriesD—Other perspectives contemporary trendsE—Not applicable

10 Findings A—New perspectivesB—Consistent with previously published literatureC—Previous model with different dataset/time periodD—Comparative studyE—OthersF—Not applicable



Exhibit4

Data

Classificatio

nandCa

tegorizationforEach

Paper

NAu

thor(s)

Category

12

34

56

78

910

1Acharyaetal.(2007)

EB

A,B,

DC

A,B

DB

AA,

DA,

B2

Acharya,Davydenko,andStrebulaev

(2012)

EB

A,D

BA,

B,C

DB

AA

A,B

3AcharyaandMerrouche

(2012)

EB

A,B

BA,

BD

CD

DA,

B4

Acharyaetal.(2013)

CB

A,B,

DB

A,B,

CD

BA

CA,

B5

Acharyaetal.(2014)

CB

A,B,

DB

A,B

DB

AA,

BA,

B6

Agliardi,Agliardi,andSpanjers(2016)

CB

A,C

DG

FG

EB

A,B

7Al-Najjar(2013)

AB

BA

AA,

DD,

EB

DB,

C,D

8Al-Najjar(2015)

AB

BA

A,B,

DD

CB

AB

9Alimov

(2014)

BB

DB

A,B,

DD

BB

DA,

B10

Almeida

etal.(2004)

E,F

BA,

B,D

CA,

B,D

DB

AB

B11

Almeida

andCampello

(2010)

EB

B,D

BA,

BD

BA

AA,

B12

Almeida,C

ampello,and

Hackbarth

(2011)

CB

A,B,

DC

A,B

CB

AA,

DA,

B13

Almeida,C

ampello,and

Weisbach(2011)

EB

AD

A,B

DH

EA

A14

Almeida

etal.(2014)

EA

A,E

DF

EH

ED

G15

Anderson

andCarverhill(2012)

FB

A,B,

CD

A,B

DB

AA

A,B

16Anderson

andHamadi(2016)

DB

BA

A,B

DC

AC

A,B

17Andrén

andJankensgård(2015)

FB

BA

AD

BB

CB

18Arnold(2014)

DB

AD

A,B,

DD

HE

CB

10ArouriandPijourlet(2015)

BB

BA

A,B

DA

CC

A,B

20Arslan

etal.(2006)

FB

BA

A,B,

DB

DC

CB,

C21

Azar

etal.(2016)

CB

BA

A,C

DB

AD

A,B

22BakkeandGu

(2016)

CB

A,B,

CA

AC,

DB

AD

A,B

23Baldenius(2006)

DB

AD

A,B,

DD

HE

DA

24Baoetal.(2012)

FB

B,D

CA,

BD

BA

DA,

B25

Batesetal.(2009)

CB

B,D

AA,

BD

BA

AB

(Continues)



NAu

thor(s)

Category

12

34

56

78

910

26Beuselinck

andDu

(2016)

AB

BA,

BA,

CD

B,D

BC

A27

BigelliandSánchez-Vidal(2012)

AB

B,D

AA,

B,C,

DC,

DC

BD

B28

Blissetal.(2015)

EB

BB

A,B,

DD

BA

DA,

B29

Boileau

andMoyen

(2016)

CB

A,C

CA

DB

AD

A,B

30Boutinetal.(2013)

EB

B,D

CA,

B,C,

DB

CB

DA,

B31

Breuer,R

ieger,andSoypak

(2016)

AA,

BA,

BA

EA

AD

DA

32Briskeretal.(2013)

CB

DC

A,B,

DD

BA

DA,

B33

Brow

nandPetersen

(2011)

EB

BC

A,B

DB

AD

A,B

34Cabello

(2017)

EA

AD

GF

GE

DA

35Campello

etal.(2010)

EB,

FD

CA,

B,E

DA

DA

A,B

36Campello

etal.(2011)

EB,

FD

CA,

B,E

DA

DC

A,B

37Chen

(2008)

DB

BA

A,B,

DD

BC

CA,

B38

Chen

andChuang

(2009)

DB

BA

A,B

DB

BD

B39

Chen

etal.(2012)

DB

BA

A,B,

DD

DB

DA,

B40

Chen

etal.(2014)

DB

BA

A,B,

C,D

DD

DD

A,B

41Chen,D

ou,etal.(2015)

AB

BA

A,C,

FA,

DA

AC

A,B

42Chen,H

arford,and

Lin(2015)

DB

BB

A,D

DB

AC

A,B

43Cheung

(2016)

DB

BA,

BA

DB

AD

A,B

44Colquittetal.(1999)

AB

BA

A,B

DB

DC

B45

Core,G

uay,andVerdi(2006)

DB

BB

AD

BA

DB,

C46

CustódioandMetzger

(2014)

AB

B,D

BA,

B,D

DB

AA,

DA,

B47

OBrien(2017)

DB

BA

A,D

C,D

BA

C,D

C,B

48Décamps,M

ariotti,R

ochet,andVilleneuve(2011)

AB

AD

A,B

DH

EC,

DA

49DenisandSibilkov

(2010)

B,E

BB

CA,

BD

BA

CB

50Denis(2011)

AA

ED

EF

GE

ED

51Disatnik,D

uchin,andSchm

idt(2013)

AB

A,B

BA,

B,D

DB

CD

A,B

52Dittm

aretal.(2003)

DB

DA

A,B,

CA,

DA

DC

B53

Dittm

arandMahrt-Sm

ith(2007)

B,D

BB

CA,

BD

BA

CB,

C54

D’Mello,K

rishnaswam

i,andLarkin(2008)

AB

B,D

AA,

B,D

C,D

BA

CA,

B55

Doidge

andDyck

(2015)

AB

BB

A,B,

DD

BB

DA,

B

(Continues)



NAu

thor(s)

Category

12

34

56

78

910

56Drobetzetal.(2010)

BB

BB

A,B

A,D

AA

CB,

C57

Duchin(2010)

AB

BA

A,B

C,D

AA

CB

58Du

dley

andZhang(2016)

DB

BA

A,D,

EA,

DA

AC

A,B

59Faff,

Kwok,P

odolski,andWong(2016)

AB

A,B

CA,

C,D

DB

AD

A,B

60Faleye

(2004)

DB

B,D

BA,

B,D

DB

AC

A,B

61Faulkender

andWang(2006)

BB

B,D

CA,

BD

BB

CA,

B62

Feng

andJohansson(2014)

AB

B,D

AA,

BD

DA

CB

63FernandesandGonenc

(2016)

AB

BB

A,B,

C,D

AA

AD

A,B

64Fritz

Foleyetal.(2007)

BB

BA

A,B,

DD

BA

CB

65Francisetal.(2014)

EB

DA

A,B,

DD

BA

DA,

B66

Fresard(2010)

EB

DB

A,B,

DC,

DB

AC

A,B

67FrésardandSalva(2010)

DB

BB

A,B,

CA,

DA

AD

B68

Fresard(2011)

FB

BC

A,B

DB

AC

A,B

69Gamba

andTriantis(2008)

CB

AD

A,B

DH

ED

A70

Gao(2011)

AB

BC

A,B

DB

AC

A,B

71Gaoetal.(2013)

AB

BA

A,B

C,D

BA

CA,

B72

GaoandJia(2015)

BB

BB

AD

BC

CA,

B73

Ghaly,Dang,and

Stathopoulos

(2015)

AB

BA

A,D

DB

BD

A,B

74Gore

(2009)

AB

BA

A,B

CB

BC

A,B

75Gryglewicz(2011)

EA

AD

GF

GE

DA

76HanandQiu(2007)

CB

BA

A,B

DB

BC

A,B

77Hansen

andWagner(2017)

C,F

BB

BA,

BD

AA

DB,

D78

Harford

(1999)

DB

BC

AC,

DB

AA

A,B

79Harford

etal.(2008)

DB

B,D

AA,

BD

BA

CB

80Harford

etal.(2014)

AB

DB

A,B,

DC,

DB

AC

A,B

81Haushalteretal.(2007)

AB

B,D

AA,

BC,

DB

BD

A,B

82Hawetal.(2011)

BB

DB

A,B,

C,D

DA

BA,

BA,

B83

HeandWintoki(2016)

AB

BA

AD

BA

DA,

B84

Hoberg

etal.(2014)

CB

BC

A,B

C,D

BA

DA,

B85

Holmström

andTirole(1998)

DB

A,C

DG

DH

EA

A

(Continues)



NAu

thor(s)

Category

12

34

56

78

910

86Hsu,Huang,andLai(2014)

DB

BA

AD

BB

CB

87HuangandWang(2009)

CB

A,B,

DC

A,B

DB

AA

A,B

88Huangetal.(2013)

AB

DA

A,B,

CD

AA

CA,

B89

Huang,Guo,Ma,andZhang(2015)

CB

BB

AD

BB

CA,

B90

Hugonnieretal.(2014)

AB

AD

FE

HE

DA

91Iskandar-DattaandJia(2012)

AB

BA

AA

AA

C,D

A,B

92Itzkowitz

(2013)

A,C

BB

AA,

BD,

EB

AA

B93

Jain,Li,andShao

(2013)

AB

BA

A,B

DB

BD

B94

JiangandLie(2016)

AB

BA

AD

BA

CB

95KahleandStulz(2013)

EB

DC

A,B,

DD

BA

CB

96Kalcheva

andLins

(2007)

DB

BA

A,B

DA

DC,

DB

97Kim

etal.(1998)

AB

BA

A,B

C,D

BA

A,D

A,B

98Kim

andBettis(2014)

CB

BB

AD

BA

CB

99Kisser

(2013)

BA,

BA,

CB

AD

BB

CA,

B100

Klasaetal.(2009)

AB

DC

A,B

DD

AD

B101

Koussisetal.(2017)

CA

AD

GE

GE

C,D

A102

Kuan,Li,andChu(2011)

DB

DA

A,B

DD

AD

B103

Kusnadiand

Wei(2011)

FB

BC

A,B,

DD

AB

DB

104

Kusnadietal.(2015)

AB

BA

A,D

DD

BD

B105

Lamont(1997)

EB

DC

AC,

DB

DD

A,B

106

Larkin(2013)

AB,

FB

BA,

BD

BA

C,D

B107

LeeandSuh(2011)

AB

DB

A,B,

CA,

DA

BC

B108

LevitasandMcFadyen(2009)

AB

DC

A,B

DB

BD

B109

Lins,S

ervaes,and

Tufano

(2010)

CB,

FD

CA

DA

DD

A,B

110

LiuandMauer

(2011)

BB

AA

A,B

DB

AA

B111

Liu,Mauer,and

Zhang(2014)

BB

BA

A,B

BC

BD

B112

Liu,Luo,andTian

(2015)

DB

BA

AD

DB

CA,

B113

Locorotondo,Dewaelheyns,and

Hulle

(2014)

AB

BB

A,B

BC

BD

B114

Louisetal.(2012)

BB

BC

A,B

DB

AD

B115

May

(2014)

EB

BB

A,B

DB

DD

A,B

(Continues)



NAu

thor(s)

Category

12

34

56

78

910

116

Megginson

etal.(2014)

BB

BA

A,B

A,C,

DD

AD

A,B

117

Meltzer

(1963)

AB

BD

AC,

DB

AD

A,B

118

Mikkelson

andPartch(2003)

AB

BC

A,B

C,D

BA

CB

119

Mun

andJang

(2015)

CB

BB

AD

BA

DA,

B120

NasonandPatel(2016)

BB

BB

AD

BB

DA,

B121

Neam

tiu,S

hroff,White,and

Williams(2014)

EB

A,D

AA,

B,C

DB

AA

B122

NikolovandWhited(2014)

DB

A,D

CA,

B,C

DB

AC

A,B

123

Opleretal.(1999)

AB

BA

A,B

C,D

BA

DA,

B124

OrensandReheul(2013)

AB,

FB

AA,

ED

CD

DA,

B125

OzkanandOzkan(2004)

AB

BA

A,B

DC

AD

B126

Palazzo(2012)

CB

A,B

BA,

BD

BA

EA,

B127

Pinkow

itzandWilliamson(2001)

CB

BA

A,B

A,B,

DA

AA,

DA,

B128

Pinkow

itzetal.(2006)

DB

BC

A,B,

CA,

DA

AA

B129

Pinkow

itzetal.(2013)

AB

DC

A,B,

DD

BA

CA,

B130

QiuandWan

(2015)

EB

BA

A,B

C,D

BA

DA,

B131

RamírezandTadesse(2009)

AB

BA

A,B,

CA,

DA

AA

A,B

132

Rapp

etal.(2014)

AB

DC

A,B

DB

AA,

DB

133

RiddickandWhited(2009)

FB

A,B,

C,D

CA,

BD

AA

B,C

A,B

134

SchrothandSzalay

(2009)

EB

A,B

BA,

DE

BA

DA,

B135

Simutin(2013)

AB

BC

BB

BA

DA,

B136

Smith

(2016)

AB

BA

A,D

D,E

BA

CA,

B137

Song

andLee(2012)

EB

DA

A,B,

DD

DA

DB

138

Subram

aniam

etal.(2011)

AB

BC

A,B

C,D

BA

DB

139

Tong

(2010)

DB

BB

A,B,

CD

BB

CB

140

Tong

(2011)

A,B

BB

CA,

BC,

DB

BC

B141

Wu,Rui,andWu(2012)

EB

BA

A,B,

CD

DA

CA,

B142

Xuetal.(2016)

DB

BA,

BA,

B,D

DD

AC,

DA,

B143

Yun(2009)

DB

DA

A,B

DD

AC

A,B

144

Yung

andNafar(2014)

AB

BA

AA

AA

CA,

B



needs, whereas the speculativemotive is associated with prof-itable future investment oppor-tunities (Bates et al., 2009;Dittmar, Mahrt-Smith, &Servaes, 2003). In a setting ofvaluable investment opportuni-ties, cash holdings are consid-ered an important source ofinternal capital (Lamont, 1997)that enables firms to takeadvantage of growth opportu-nities, to avoid higher costs ofraising funds, and to increasetheir financial flexibility(Gamba & Triantis, 2008;Rapp, Schmid, &Urban, 2014).

The precautionary motivearises when firms are likelyto face any constraints or uncer-tainty related to future economicor business conditions (Keynes,1936). Under a tax-based per-spective, firms would hold cashoverseas to avoid taxation costsassociated with the repatriationof foreign income (Fritz Foley,Hartzell, Titman, & Twite,2007) or/and to pay future taxclaims on prior and current taxpositions (Dyreng, Hanlon, &Maydew, 2008).

In the presence of agencyconflicts, cash holdings cannotbe collateralized given thetransformation risk associatedwith agent misbehavior(Myers & Rajan, 1998). Theagency motive suggests thatcompensation and governancemechanisms such as higherinvestor protection, better lawenforcement, and stronger capi-tal markets prevent managersfrom holding excess cash anddisgorging cash on value-decreasing projects (Dittmaret al., 2003; Ferreira & Vilela,2004; Gao, Harford, & Li,2013; Harford, Mansi, &Maxwell, 2008; Jensen, 1986;Jensen & Meckling, 1976;Yung & Nafar, 2014).

Agency incentives aimto discipline manager mis-behavior regarding the efficientuse of cash and to align man-agers and shareholdersinterests to enhance firm value(Anderson & Hamadi, 2016;Cheung, 2016; Dittmar et al.,2003; Dudley & Zhang, 2016;Louis, Sun, & Urcan, 2012;Nikolov & Whited, 2014; Debet al., 2017). However, agencyconflicts can have a relevantimpact in cash holdings of cor-porations. For instance, Im,Park, and Zhao (2017) analyzethat value of cash is affected byuncertainty through agencyconflicts and financial con-straints, whereas Bhuiyan andHooks (2019) discuss that prob-lem directors in the board of acompany weaken corporategovernance and encourageexcess cash holdings.

In addition, country-levelvariables can also impact cashholdings due to agency prob-lems. Dudley and Zhang (2016)suggest that agency hypothesispredicts that shareholders willdemand firms to disgorge morecash in countries with lowerlevel of societal trust. Loncan(2018) finds that mitigation ofagency conflicts and reductionof financing constraints can beassociate with the negativeimpact of foreign institutionalownership in cash holding,using a sample of firms inemerging economies.

The financial constraintsperspective suggests that firmsmay reduce the cost of accessingexternal financing, mitigate andrefinance liquidity risk, decreasethe likelihood of bypassingvalue-enhancing investments,and/or hedge against futureshortfalls when maintaining cashreserves (Acharya, Almeida, &Campello, 2013; Acharya et al.,2007; Almeida & Campello,

2010; Almeida et al., 2004; Bliss,Cheng, & Denis, 2015; Boutin,Cestone, Fumagalli, Pica, &Serrano-Velarde, 2013;Campello, Graham, & Harvey,2010; Francis, Hasan, & Wang,2014; Harford, Klasa, & Max-well, 2014; Kahle &Stulz, 2013).

Based on the diversificationargument, conglomerates havebetter access to internal capitalmarkets, lower costs for theconversion of assets into cash,better investment opportuni-ties, and higher agency coststhan firms that are focused ona specific target (Bakke & Gu,2016; Fernandes & Gonenc,2016; Subramaniam, Tang,Yue, & Zhou, 2011; Tong,2011). Hence, diversified firmshold less cash than focusedfirms over time (Subramaniamet al., 2011) and on averagemaintain a large and persistentcash differential compared tofocused firms from 1990 to2013 (Bakke & Gu, 2016).

However, Tong (2011)reveals that corporate diversifi-cation has a negative impacton the value of cash holdingsand a positive effect on holdingcash when diversified firms areunconstrained and have alower level of corporate gover-nance, providing evidence thatshareholders attribute lowervalue to cash holdings, particu-larly due to the potential ineffi-ciency of spending cash insidethese firms.

Cash holdings may also beused for defensive strategies,providing advantages to detercompetitors from buildingcapacity ahead of demand,acquiring profitable targets,investing in imminent technol-ogies, or taking advantageof diffuse innovations (Kim &Bettis, 2014; Pinkowitz,Sturgess, & Williamson, 2013;



Qiu & Wan, 2015). In theproduct market competitioncontext, cash holdings providefinancial flexibility for firmsfacing product market threats(Alimov, 2014; Hoberg,Phillips, & Prabhala, 2014),serve firms with the financialstrength for future expansionin market share over theirrivals, and avoid predationrisk (Fresard, 2010;Haushalter et al., 2007).

The Determinants of CashHoldings

Understanding the influ-ences on firms to hold cashprovides a key insight into thedynamics of cash managementand corporate decisions (Azar,Kagy, & Schmalz, 2016). Inthis regard, identifying thedeterminants of cash holdingsto explain how firms allocatetheir internal funds was firstdiscussed by Vogel andMaddala (1967), Kim et al.(1998), and Opler et al. (1999).The authors systematicallydescribe the impact on cash-holding behavior of elementssuch as size, profitability,growth opportunities, cash flowvolatility, credit rating, firmvalue, capital expenditure,acquisition spending, payouts,and access to capital markets.

Following these discus-sions, the studies of Mikkelsonand Partch (2003), Ferreira andVilela (2004), Han and Qiu(2007), Bates et al. (2009), Kimand Bettis (2014), Azar et al.(2016), and Beuselinck andDu (2016) examined the varia-tion and the drivers of therecent and persistent increasesin average cash holdings.

A growing body of literaturehas highlighted the relevance offirm-level characteristics in deter-mining corporate cash holdings

behavior, including size(Bigelli & Sánchez-Vidal, 2012;Colquitt, Sommer, & Godwin,1999; Orens & Reheul, 2013),performance (Deb et al., 2017;Simutin, 2013), profitability(Mun & Jang, 2015), leverage(Anderson & Carverhill, 2012),research & development(Brown & Petersen, 2011;Dittmar et al., 2003; He &Wintoki, 2016), and risk(Acharya et al., 2014; Harfordet al., 2014; Palazzo, 2012).

Additionally, studies haveexplored the relationshipbetween cash holdings andfinancial crisis (Bliss et al.,2015; Campello et al., 2010,2011; Davydova & Sokolov,2014; Nason & Patel, 2016),corruption (Smith, 2016;Thakur & Kannadhasan, 2019;Xu & Li, 2018, GDP growth(Graham & Leary, 2016),creditor rights (Yung & Nafar,2014), national cultures (Chen,Dou, et al., 2015; Ramírez &Tadesse, 2009), sectors (Bateset al., 2009; Lamont, 1997),institutions, and structures suchas banks (Francis et al., 2014;Kahle & Stulz, 2013), unions(Klasa, Maxwell, & Ortiz-Molina, 2009), and govern-ments (Chen, Li, Xiao, & Zou,2014; Feng & Johansson, 2014;Xu, Chen, Xu, & Chan, 2016).

Cash holdings have also beenanalyzed as an antecedent factorthat influences other corporatefinancial decisions and strategiessuch as investment levels (Arslan,Florackis, & Ozkan, 2006;Bakke &Gu, 2016; Bao, Chan, &Zhang, 2012; Song & Lee, 2012),corporate social responsibility(Arouri & Pijourlet, 2015;Cheung, 2016), supplierrelationships (Bae & Wang,2015; Itzkowitz, 2013), acquisi-tions (Almeida, Campello, &Hackbarth, 2011; Harford, 1999;Lie & Liu, 2017; Pinkowitz

et al., 2013), share repurchases(Haw, Ho, Hu, & Zhang,2011; Lee & Suh, 2011; Rappet al., 2014), and payout policy(Koussis, Martzoukos, &Trigeorgis, 2017; Opleret al., 1999).

The Value of Cash Holdings

Corporate cash holdingsbenefit firms by reducing theirdependence on costly externalfinancing and supporting cur-rent investment opportunities(Kim et al., 1998). Nonetheless,holding cash and cash equiva-lents might directly generatetwo costs: the carrying costassociated with the lowerreturn earned on cash relativeto other investments with thesame risk level, and the trans-action cost related to feescharged on external financing(Azar et al., 2016; Dittmaret al., 2003; Kim et al., 1998).Therefore, understanding thevalue of cash is relevant to cor-porate finance (Chi & Su, 2015;Duchin, Gilbert, Harford, &Hrdlicka, 2017; Faulkender &Wang, 2006).Whereas the car-rying cost negatively impactsinvestment opportunities andexplains part of the variation inthe level of cash holdings (Azaret al., 2016), transactions costsinfluence firms to hold morecash, particularly because ofthe inability to access externalfunding and the marginal costof cash shortfalls (Bates et al.,2009; Faulkender & Wang,2006; Miller & Orr, 1966).

In this regard, the valuethat shareholders place on anextra dollar of cash held byfirms has been recently consid-ered as a relevant subject in thecorporate finance literature.The key insight is that investorsassign a value to cash holdingsaccording to the use of these



Exhibit5

PaperGo

al,M

ainCo

nclusions,Co

ntrib

utions,a

ndLimita

tions

NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

1Acharya

etal.(2007)

Tostudyhowfirm

sallocate

cash

flow

sacross

theircash

anddebt

accounts

Bothfirm

s,constrained

and

unconstrained,use

excess

cash

flow

storeduce

theam

ount

ofoutstandingdebtwhentheir

hedgingneedsarelow.Inthis

state,afirm

hashigh

invest-

mentopportunities,thus

itmay

allocateits

cash

flow

toward

debtreductions

tosave/amplify

itsdebtcapacity.H

owever,

firm

swillprefer

morecash

tolower

debtiftheirhedging

needsarehigher,thatis,ina

stateoflowfuture

investment

opportunities

Tosuggestfi

rmshave

touse

cash

anddebtas

hedging

tools.Acharyaetal.(2007)’s

paperisoneofthefirstto

operationalizeem

piricallythe

notionofhedgingneedsas

thekeydeterm

inantofthe

firm

spreferences(holdor

noth

oldcash)

2Acharya

etal.(2012)

Tostudytheinteractions

betweencash

holdings

and

creditriskfrom

atheoretical

framew

orkandem

piricaltest

Tosuggestfi

rmsthathave

larger

cash

holdings

areassoci-

ated

with

higher

levelsof

creditrisk

Byfindingthatthecorrelation

betweencash

andcreditrisk

reverses

thesign

forperiods

longer

than

1year

thefirm

becomes

positiveandstatis-

ticallysignificant.Thatis,

higher

cash

holdings

reduce

theprobabilityofacash

shortfall;however,they

increase

thelong-term

prob-

abilityofdefaultb

ecause

higher

cash

savingsrequire

reductions

invaluableinvest-

ments.C

onsequently,there

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

areno

future

increm

ental

cash

flow

stosupportits

business

cycle,andthefirm

canbecomefinancially

bankrupt

3Acharyaand

Merrouche

(2012)

Toexam

inetheeffectsof

bankingdemandforliquidity

oninterbankmarketsbefore

andduringthesubprim

ecri-

sisof2007–2009

Banksduringthe2007–2008

crisisthathadhigher

creditand

solvency

risks

hoardedmore

liquidityas

aprecautionary

response.Thisraised

overnight

interbankrates,suggestinga

contagionstylesystem

icrisk

with

operatingthroughinter-

bank

markets

Toshow

thepresence

ofa

precautionarydemandeffect

from

thepositiverelationship

betweeninterestrateand

liquiditydemandduringthe

subprim

ecrisis

4Acharya

etal.(2013)

Todevelopatheoretical

novelonthetrade-offs

betweencash

andcredit

lines

moderated

byaggre-

gateriskandliquidity

prem

ium

Tosuggestasaggregaterisk

increases,firm

saremore

exposedtosystem

aticrisks

holdingmorecash

and

decreasing

thedemandfor

creditlines

Tocomplem

entthe

theoreti-

calliterature

byexplaining

why

firm

shave

used

pledged

sourcessuch

ascash

and

creditlines

tomanagetheir

liquidityneeds

5Acharya

etal.(2014)

Todesign

atheoreticalmodel

ofcorporateliquidityand

empiricallytesttheeffectof

liquidityriskon

creditlines

andliquiditymanagem

ent

Tocharacterizecash-based

liquiditymanagem

ent,firm

stend

toinvestinilliquidpro-

jects.As

aresultofgreater

liquidityrisk,higher

costsfor

borrow

ingbank

creditlines

are

requiredfrom

thesefirm

s.Therefore,liquidityriskier

firm

sarelikelytorelyon

cash

insteadofcreditlines

forliquid-

itymanagem

ent.On

thecon-

trary,firm

swith

lowhedging

needsareassociated

with

the

probabilityofusingacreditline

Bymodelinganewidentifi-

cationstrategy

forliquidity

risktestsandhedgingneeds

tests,Acharyaetal.(2014)

offeranewinsighttothelit-

eratureaddressing

therole

ofcreditlines

asfinancial

monitorsinhandlingtheilli-

quidity

transform

ation

problem

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

6Agliardi

etal.(2016)

Toframetheimpactofam

bi-

guity

inafirm

’sequity,debt

andcash

holdings

Cash

holdings

becomemore

attractivewhentheimpactof

ambiguity

aversion

bias

islarge

Tomodeltheeffectsof

ambiguity

oncorporatedeci-

sionsandcash

holdings

ina

real-optionframew

ork

7Al-Najjar

(2013)

Toinvestigatetheeffectof

capitalstructureanddividend

policyon

cash

holdings

indeveloping

countries

such

asBrazil,Russia,India,and

Chinaandcomparingthe

results

with

asamplefrom

theUnitedStates

andthe

UnitedKingdom

Toshow

thatleverage,dividend

payout,profitability,asset

liquidity,and

firm

size

have

affected

corporatecash

hold-

ings

inboth

emerging

markets

anddevelopedcountries

(United

States

andUnitedKingdom).To

ascribethedifferences

among

thecountries

todifferent

indus-

trialandinstitutionalsettings

asthevariedfinancialdecisions

intofirm

s

Thisarticleisam

ongthefirst

toconcentrateon

emerging

markets(Brazil,Russia,

India,andChina)andthe

effectofcapitalstructureand

dividend

policyon

cash

holdings

8Al-Najjar

(2015)

Tofocuson

therelationship

amonggovernance

mecha-

nism

s,ow

nership,andcash

holdings

insm

alland

medium-sized

enterprises

(SMEs)inBritain

Toreportthatcash

holdings

are

affected

positivelyby

CEOcom-

pensationandR&

Dand

affected

negativelyby

leverage

andliquidity.C

ontrarytothe

priorliterature,grow

thopportu-

nities,cash

flow

s,andcapital

expendituresarenotrelated

toSM

Escash

holdings

Tofocuson

theimportance

ofinternalgovernance

mech-

anismsincash

holdingdeci-

sionsinside

SMEs

Despite

describingthatSM

Efirm

shave

cash

holdingtar-

gets,thisarticledoes

not

displaywhatthese

targets

areor

howfirm

sfitthese

cash

reservelevels.The

author

further

exposesthat

theequalw

eightm

ethodol-

ogyadoptedtodesign

the

governance

indexmight

lead

toan

insignificant

relation-

shipinhisstudy.Other

restrictions

arereserved

bythelim

itedavailabilityof

financialand

governance

inform

ationforSM

Es (Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

9Alimov

(2014)

Toinvestigatetheinteraction

amongproductm

arketcom

-petition,trade

liberalization,

andcorporatecash

holdings

Topointout

thattrade

liberali-

zationleadsapositiveand

causaleffectsbetweenintensify

ofmarketcom

petitionandcor-

poratecash

holdings

Itisthefirstw

orktoshow

theinfluenceofproductm

ar-

ketcom

petitionincorporate

cash

holdings

from

aquasi-

experim

ent

Thefindings

derived

from

naturalexperimentstoother

settingscannotbe

generalized

10Almeida

etal.(2004)

Todesign

aliquiditymodelof

cash

flow

sensitivityofcash

thatcaptures

theeffectof

financialconstraintson

cor-

poratepolicies

Todemonstratethecash

flow

sensitivityofcash

iscloseto

andnotstatisticallydifferent

from

zero

fortheunconstrained

firms,butpositive

andsignifi-

cantlydifferentfromzero

forthe

constrained

firms.Additionally,

constrained

firmsholdaconsid-

erableportion

ofcash

during

downturns

whileunconstrained

firmsdo

notdisplay

changesin

theircash

policies

Thefirstp

aper

topursue

the

approach

ofthesensitivityof

cash

holdings

tocash

flow

oncorporateliquidity

literature

Aspointedoutb

yHanand

Qiu(2007),thisarticledo

not

discussthefirm

’sprecau-

tionarycash

holdingin

response

tocash

flow

uncertainty

11Almeida

and

Campello

(2010)

Toexam

inetherelationship

amongfinancialconstraints,

internal,and

externalsources

offinancing

Toreportadegree

ofcomple-

mentaritybetweeninternaland

externalfinancingfundsam

ong

financially

constrained

firm

srel-

ativetothoseunconstrained,

which

might

suggestanendog-

enousconnectionbetween

investmentand

financing

decisions

Toprovideevidence

that

investmentand

financing

decisionsmight

beinterdependent

12Almeida,

Campello,and

Hackbarth

(2011)

Toproposeatheoreticalrela-

tionshipam

ongcorporate

liquidity,assetreallocation,

andacquisitions.To

exam

ine

empiricallytheroleofalter-

nativeliquidityinstrumentsin

financingacquisitions

Predictingthatfinancially

dis-

tressed

firmsaremorelikelyto

beacquiredby

firmsinthe

sameindustrybeingmoreprev-

alentamongassetspecificity

industryfirmsandusingbank

creditlines

asafinancingmech-

anismfortheseacquisitions

Topresentcreditlines

asan

effectivetooltotransfer

liquidityacross

states,partic-

ularlyfinancinginvestment

opportunitiessuch

asacquisitions

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

13Almeida,

Campello,and

Weisbach

(2011)

Toframeatheoreticalnovel

abouth

owrealcorporate

investmentd

ecisions

are

affected

byintertemporal

financingfrictions

Specifically

oncash

holdinglit-

erature,by

statingtheoretically

apositiverelationshipam

ong

financialconstraints,cashhold-

ings,and

typesofinvestment

Toincrem

entthe

literature

byprovidingatheoretical

framew

orkthatsupportspat-

ternstested

previouslyby

empiricalworks

onrisk-

taking

behavior,capital

structurechoices,hedging

strategies,and

cash

man-

agem

entp

olicies

14Almeida

etal.(2014)

Topresenta

modelanda

survey

ofem

piricalfindings

onliquiditymanagem

ent,

such

astheagency

based

theoriesofliquidity,the

real

effectsofliquiditychoices,

andtheimpactofthe

2008–2009

financialcrisis

onfirm

s’liquidity

managem

ent

Toreinforcetheimportanceof

liquiditymanagem

entresearch

foreither

modernacadem

icpur-

posesorthefinancialm

anager’s

job.Although

theliquidityman-

agem

entliterature

has

addressedseveraltopics,there

areotherunsolved

issues,for

exam

ple,theincrease

ofratio

ofcash

overassetsinthelast

years,or

theway

thatfirmshold

cash

orthelack

ofinformation

aboutthe

useofcreditlines

and

derivatives

byfirmsas

potential

substitutesourcesofcash

Analmostcom

pletesurvey

onliquiditymanagem

ent

dividedby

clusteredareason

thefieldthatpresenta

pic-

ture

ofliquiditymanagem

ent

literature

Tocoverjustapartofthelit-

eratureon

liquiditymanage-

mentrem

aining

silent

onissues

such

asestim

ates

ofthevalueofcash,the

asset

pricingimplications

ofcorpo-

rateliquidity,and

dynamic

modelsofcash

15Anderson

and

Carverhill

(2012)

Todeterm

inedynamicallythe

optim

allevelofcashholding

andleverage

policyinafirm

with

givenassetsinplace

andlong-term

debt

outstanding

Todescribetheoreticallythat

firm

shave

anegativemarginal

propensitytosave

cash

inhigher

profitabilityscenarios

independently

oftheirinvest-

mentprojects,whereas

lower

profitabilityframes

therelation-

shipbetweeninvestmentand

cash

holdings

asthey

become

highlydependentoneach

other

Toshed

light

ontheoptim

allevelofcashholdings

asa

decreasing

functionofprofit-

abilityscenarios

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

16Anderson

and

Hamadi

(2016)

Toinvestigatetheeffectof

ownershipstructureon

cash

holdings

andhowthemarket

values

thecash

heldby

Bel-

gian

firm

s

Cash

holdings

arepositively

associated

with

ownershipcon-

centrationbutnotrelatedto

managerialownership.High

levelsofcash

holdings

area

reflectionofarationalstrategy

byow

nerswho

seek

value

throughlong-term

control

Topresentthatfi

rmstarget

higher

levelsofcash

tomaintaincontrol

17Andrén

and

Jankensgård

(2015)

Toexam

inetheeffectsofan

exogenousandunexpected

shockon

theinvestment-

cash

flow

relationship

Thefinancialconstraintsof

smallfirm

sbecameless

bind-

ingduringthe2005–2008

period,although

theinvestment

opportunityratesaverage

increasedforsm

allfirm

sfaster

than

theiroperatingcash

flow

s

Tohighlightthechangesof

investment-cashflow

sensitiv-

itytothecostofexternal

financingbeforeandaftera

substantialand

persistent

shockintheoiland

gasindus-

trybetween2000

and2008

18Arnold(2014)

Toextend

andtestatrade-

offm

odelofcapitalstructure

incorporatingcorporatecash

managem

entand

agency

conflictsbetweenmanagers

andshareholders

Topredicttheoreticallythat

managersholdexcess

amounts

ofcash

todeferdefaultriskby

liquidatingadebtinsteadof

employingthesecash

holdings

ininvestmentopportunitiesdur-

ingeconom

icdistress

Toaggregatethroughmodel-

inganotherinsightthan

agency

framew

orkon

why

managersholdexcess

cash

inside

companies.Topresent

onlyasimulationofthis

framew

ork

19Arouriand

Pijourlet

(2015)

Toinvestigatehowcorporate

socialresponsibilityperfor-

mance

affectsthevalueof

cash

holdings

Higher

corporatesocialrespon-

sibilityperform

ance

leadstoa

higher

marketvalue

ofcash

holdings

Highercorporatesocialrespon-

sibilityisrelatedtoamoreeffi-

cientuseofcash

holdings

mitigatingagency

conflicts

20Arslan

etal.(2006)

Toexploretheinteraction

amongfinancingconstraints,

investmentcash-flow

sensi-

tivities,and

cash

holdings

inTurkishfirm

s

Tosuggestcashisahedging

instrumentthatleads

with

cash

flow

fluctuations

andfuelsinvest-

mentopportunities.Financiallycon-

strained

firmsholdlesscash

and

displaya

higherinvestmentcash

flow

sensitivitythan

unconstrained

firmsintheTurkish

context

Topresenta

view

thatcash

holdings

might

beaproxyfor

financialconstraints

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

21Azar

etal.(2016)

Toexam

inehowchangesin

thecostofcarryexplainthe

dynamicsofliquid-assets

holdings

intheU.S.

firm

sandabroad

from

1945

to2013

Thevariationinthecostof

carrydrives

changesover

time

inthedynamicsandlevelof

corporatecash

holdings,bothin

theUnitedStates

andabroad

Toshow

thatcurrent

U.S.

cash

holdings

aresimi-

larinthecontextofa

long-

term

historicalandan

inter-

nationalperspective

Tonotinclude

firm

-levelfac-

torsthatcouldaffectthecost

andbenefitofholding

cash

22Bakkeand

Gu(2016)

Toexam

inetherelationship

amonginvestment,cash

sav-

ings,and

diversificationdeci-

sionsusingadynamicmodel

Cash

holdings

decrease

when

firm

sdiversify

andefficient

internalcapitalreduces

the

need

toretaincash

inconglom-

eratefirm

s

Tostudythecash

differences

betweendiversified

and

focusedfirm

sandtoinvesti-

gatethereallocationof

resourcesthroughinternal

capitalm

arkets

23Baldenius

(2006)

Toframetheoreticalinsight

andtoexplorehowagency

relationships

affectcorporate

cash

decisionsinside

verti-

cally

integrated

firm

s

Topresentinsight

thatow

ner-

shipaffectsmanagers’behavior

invertically

integrated

firm

s,alleviatingcash

hold-upand

underinvestmentp

roblem

s

Tolayon

verticalintegration

settingsshow

inghowcom-

pensationdesign

varies

across

organizationalstrate-

gies

andcaninfluencefirm

perform

ance

andcash

holdings

24Bao

etal.(2012)

Toexam

inetherelationship

betweenthecash

flow

sensi-

tivity

ofcash

andcash

flow

environm

entfaced

bythe

firm

(negativeor

positive)

Firm

shave

different

levelsof

responsestotheircash

hold-

ings

whenfacing

positiveand

negativecash

flow

s.Further,to

identifythatconstrained

firm

sfacing

profitshocksneed

tosave

money

andmustcease

toinvestinnewprojects

Todisplayanonlinearper-

spectiveon

cash

flow

sensi-

tivity

ofcash,m

eaning

firm

srespondasym

metricallyto

theircash

holdings

asthey

face

different

cash

flow

environm

ents

25Bates

etal.(2009)

Toinvestigatethecauses

ofU.S.

firm

sholdingmorecash

than

they

used

to

Toidentifyasignificant

increase

inthecash

holdings

anddecrease

innetdebtof

U.S.

firm

sfrom

1980

to2006.

Topinpoint

thisincrease

being

driven

byprecautionarysavings,

Todocumenta

broadcom-

parativeview

onwhy

differ-

enttypes

ofAm

erican

corporations

have

maintained

morecash

than

they

effec-

tivelyneed

Datarequirementslim

itthe

size

ofsampleinBatesetal.

(2009)’spaper

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

especiallyintoindustrieswith

higher

idiosyncratic

riskand

thosethatdo

notp

aydividends,

butare

notinfluenced

byagency

conflicts

26Beuselinck

andDu

(2016)

Toexam

inethedeterm

inants

ofcash

holdings

inChinese

subsidiariesof

U.S.

multinational

corporations

Multinationalcorporations

reservecash

inforeignsubsidi-

arieswith

innovationand

know

ledgetransfercapabilities

Highlightingtherelevanceof

subsidiaryboards

andexpa-

triateCEOs

inmonitoringand

controlling

foreignsubsidi-

ariestoavoidthepotential

expropriationriskofforeign

cash

holdings

27Bigelliand

Sánchez-Vidal

(2012)

Tostudythedeterm

inantsof

corporatecash

holdings

inprivateItalianfirm

s

Smaller,riskier,higherfinanc-

ingdeficits,and

youngerItalian

firm

stend

toholdmorecash

reserves

andless

noncash

components(suchas

bank

debt

andnetw

orking

capital)than

theotherfirm

s(larger

and

richercompanies)

Tocontributetotheliterature

oncash

holdingby

analyzing

thedeterm

inantsofcash

holdings

inItalianpri-

vatefirm

s

28Bliss

etal.(2015)

Tostudyiffirm

sadjusttheir

corporatepayout

policy,

investment,andcash

reten-

tionbefore

andduringthe

subprim

ecrisis

Firm

sreduce

payout

rations

andsharerepurchasesto

increase

cash

reserves

orto

fund

corporateinvestmentd

ur-

ingthe2008–2009

crisis

period

Toshow

thatfirm

susepay-

outreductions

asasubstitute

financingsource

whenthe

costofexternalfinancing

increasesover

thecrisis

period

29Boileau

and

Moyen

(2016)

Toanalyzethemechanism

sbehind

theriseincorporate

liquiditiessincethe1970s

Alargeincrease

incash

hold-

ings

andwidespreadcreditline

useareduetothechange

ina

firm

’svolatility

andconse-

quently

itshigher

liquidity

needs

Toreinforcemotives

forhold-

ingcash,suchas

precaution-

aryandliquidityreasons

Tonotexplore

thefactors

thathave

driven

thechanges

infirm

s’compositions

over

timeandhowthesemecha-

nism

smay

beconnectedto

cash

holdings

andcreditline

usage

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

30Boutin

etal.(2013)

Tostudytherelationship

betweeninternalcapitalm

ar-

ketsoperatingwithinbusi-

ness

groups

andentrant

firm

sintothemarket

Firm

sfrom

financially

strong

business

groups

have

their

entry

intothemarketfacilitated

becausethey

aresupportedby

internalcapitalm

arketspro-

videdby

otheraffiliatedfirm

s

Thisisthefirstpaper

toem

piricallyassess

theimpact

ofbusiness

groupcash

hold-

ings

onproductm

arketcom

-petition.To

setu

paunique

datasetallowingnewconclu-

sionson

French

business

groups

tobe

reached

31Breuer

etal.(2016)

Toinvestigatetherelation-

shipbetweeninvestor

prefer-

encesandcash

managem

ent

Thevalueofcash

andthe

amount

ofcash

holdings

depend

ontheinvestor’sprefer-

ence

andifafirm

isfinancially

constrained

Byattachinginvestors’

behavior

towardam

biguous

investmentreturns

tocash

managem

entd

ecisions

32Brisker

etal.(2013)

Toanalyzeiftheadditionto

S&P500Indexaffectsa

firm

’sliquiditypolicy,specifi-

cally

incash

holdings

managem

ent

Firm

stend

toholdon

average

7%less

cash

aftertheinclusion

intotheS&

P500Index,while

firm

sinthetop-size-decile

ofCompustatincrease

theircash

holdings

over

time

Thisisthefirstpaper

todoc-

umentthatthe

cash

holding

policyofafirm

isaffected

byinclusionintotheS&

P500Index

Theem

piricalsupportofthe

declininginvestmentoppor-

tunitieshypothesiscanbe

explainedby

otherissues,

such

astheincrease

ofacquisitionsfoundby

the

authorsintoindexedfirm

s33

Brow

nand

Petersen

(2011)

Toexam

inetheroleofcorpo-

ratecash

holdings

onR&

Dinvestmentsduringfinance

shocks

Youngerfirm

sfacing

financing

constraintsrelyon

cash

hold-

ings

tobuffertheirR&

Dflow

sfrom

financialdow

nturns

Toprovideinsightson

the

importanceofcash

holdings

toR&

D-intensivefirm

s,espe-

ciallyforyoungercompanies

34Cabello

(2017)

Toproposeanewmethodol-

ogythatfindstheoptim

allevelofcashandimproves

cash

managem

entatbranch

levelinthebankingindustry

Toshow

themainconditions

necessaryforbankstoensure

optim

alcash

holdings

andeffi-

cientcashmanagem

ent

Toprovideabranch-level

cash

holdings

modelforthe

bankingindustrytominimize

theriskofbankruptcy

inlong-term

projections

35Campello

etal.(2010)

Todevelopasurvey-based

measure

offinancialcon-

straintthatidentifies

cross-

sectionalvariations

in

Constrained

firmsreportedplans

ofcutting

morespending

inem

ployment(by

11%),technology

(by22%),capitalinvestment

Tocontributewith

anew

perspectiveon

realcorporate

decisionsandfinancialcon-

straintsby

surveyingCFOs

of

Theauthorsareconcerned

thatuncontrolledfirm

s’het-

erogeneitymay

confound

theirinferences.The

authors

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

liquidityandspending

plans

forpublicandprivatefirm

saround

theworldduringthe

2008

crisis

(by9%

),anddividendpaym

ents

(by14%)in2009.Firm

sfacing

financialconstraintsholdmore

cash

toprotectthemselvesfrom

financialdow

nturns

than

unconstrained

peers

firm

saround

theworlddur-

ingthe2008

financialcrisis

also

emphasizethatresearch

basedon

surveysmay

becomprom

ised

ifquestions

aremisunderstood

bythe

audience

36Campello

etal.(2011)

Toinvestigatetheinteraction

betweeninternalandexternal

sourcesofliquidityon

corpo-

ratedecisions,such

asinvestment,technology,and

employmentexpenditures

duringthefinancial

2008–2009

crisis

Todisplaythatsm

aller,private,

non-investmentgrade,and

unprofitablefirmsdraw

signifi-

cantlylargeram

ountsoffunds

undertheirlinefacilitiesthan

their

larger,public,investment-grade,

andprofitablecounterparts.Fur-

ther,byexposingthesubstitution

effectsofinternalfundstothe

externalones

duringthecrisis

Tolayon

theroleofdraw

-downactivity

andthe

dynamicsofcovenant

viola-

tions

oncorporatemanage-

mentliquidity.B

ydeeply

analyzingtheinfluenceof

liquidityon

corporatereal

decisions,theauthorsshed

light

onhowliquidityman-

agem

entand

real-sidedeci-

sionsareinterconnected

Thisarticleislim

itedon

one

crosssectionoffirm

s.By

usingsurveystogather

pre-

viousinform

ationfrom

corpo-

ratemanagers,“itisstill

possiblethatsomeofthe

questions

weremisunder-

stoodor

otherwiseproduce

noisymeasuresofthevari-

ablesofinterest”

37Chen

(2008)

Tostudytheinfluenceof

governance

oncorporate

cash

holdingpoliciesinlisted

neweconom

yandoldecon-

omyfirm

s

Listed

neweconom

yandold

econom

ybehave

differently

regardingtheinteraction

betweencash

holdings

andcor-

porategovernance.Firm

swith

higher

boardindependence

hold

morecash

than

theircounter-

parts

forrisk-aversion

reasons

andinvestmentopportunities

Thisarticleisthefirsttodis-

tinguishtheeffectsofcorpo-

rategovernance

oncash

holdings

inlistednewecon-

omyandoldeconom

yfirm

s

Themainlim

itations

pointed

outbytheauthorsarethe

studysampleandthemea-

surementofantitakeover

index

38Chen

and

Chuang

(2009)

Toanalyzetheinteraction

betweencorporatecash

holdings

andgovernance

mechanism

sinhigh-tech

firm

s

CEOow

nership,VC

directors,

andindependentd

irectorsposi-

tivelyaffectcorporatecash

holdings

Byshow

ingtheeffectsofcor-

porategovernance

oncorporate

cash

holdings

aredifferent

betweenhigh-tech

andnon-

high-tech

firms,especiallyin

caseswhereventurecapitalists

(VCs)and

foundersplayrolesin

theirgovernancemechanism

s

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

39Chen

etal.(2012)

Toshapethesensitivityof

cash

holdings

from

corporate

governance

inside

Chi-

nese

firm

s

Usingthe2005

sharereform,

thisarticleshow

scorporatecash

holdingdecreasedfrom23.5%

ofnoncashassetsto20.8%

ofnoncashassetsafterthereform,

particularly

infirmswith

weaker

corporategovernance

andtighter

financialconstraints

Topresentthe

change

ofcorporatecash

holding

behavior

afterasharereform

in2005

andits

relationship

with

corporategovernance

andfinancialconstraints

40Chen

etal.(2014)

Toanalyzetheeffectsofgov-

ernm

entq

ualityon

cash

holdings

inChina

Chen

etal.(2014)present

evi-

dencethatgovernmentq

uality

isnegativelyrelatedtocorpo-

ratecash

holdings

infirm

sfac-

ingfinancialconstraints.

Moreover,Chen

etal.(2014)

find

thatabetterquality

ofgov-

ernm

entb

oostsfirm

s’access

tobank

loansandtrade

credit,

reducing

financialconstraints,

andallowingless

cash

holdings

byprivatelocalfirm

sinChina

Chen

etal.(2014)com

bine

lawandfinanceliteratureto

demonstratetheway

govern-

mentqualitymight

mitigate

financialconstraintsand

reduce

thelevelofcash

holdings

offirm

sinChina

41Chen,D

ou,

etal.(2015)

Toevaluatetheimpactsof

nationalculturaldimensions

(individualism

anduncer-

taintyavoidance)on

corpo-

ratecash

holdings

around

theworld

Higher

individualism

index

country-firm

sor

lower

uncer-

taintyavoidanceindexcountry-

firm

sretainless

cash

than

their

counterpartg

roups.Moreover,

higher

individualism

ratedfirm

stend

toinvestmoreincapital

expenditures,acquisitions,and

repurchases,yettheyspend

less

ondividend

paym

ents.

Firm

sinhigher

uncertainty

avoidanceindexcountries

reservemorecash

butdonot

engage

inrepurchases

Byrelyingon

distinctlitera-

turesfrom

corporatecash

holdings,cross-culturalpsy-

chology,andbehavioral

financetopresentinfirst-

hand

theeffectsofnational

culture

oncorporatedeci-

sions,particularly

oncash

holdingpolicy

Even

though

emphasizing

excess

cash

reserves

could

induce

managerstospend

money

inacquisitions,capital

expenditures,and

repurchases,thisarticledoes

notspecifythefeatures

ofthistype

ofspending

inside

firm

ssuch

asthequality

orrisklevelofcorporate

investment

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

42Chen,H

arford,

and

Lin(2015)

Toexam

inetheeffectsof

analystcoverageon

mitigat-

ingagency

conflictsfrom

brokerageclosures

andbro-

kerage

mergers

Managersoffirm

sthatexperi-

ence

anexogenousdecrease

inanalystcoveragearemore

likelytomisusecash

reserves,

makevalue-destroying

acquisi-

tions,and

engage

inearnings

managem

entactivities

Todisclosure

themonitoring

rolethatfinancialanalysts

play

inmitigatingagency

problemsbetweenmanagers

andoutsideshareholders

43Cheung

(2016)

Toexploretherelation

betweencorporatesocial

responsibilityandcash

holdings

Corporatesocialresponsibilityis

positivelyandsignificantlycor-

relatedwith

corporatecash

holdings

from

1991

to2011

Byidentifying

first-hand

that

corporatesocialresponsibility

affectscash

holdings

through

thechannelsofsystem

atic

risk,idiosyncratic

risk,and

corporategovernance

44Colquitt

etal.(1999)

Toinvestigatethevariationin

cash

holdings

amongAm

eri-

canproperty-liabilityinsurers

from

1993

to1995

Smallerinsurancefirm

s,insurerswith

shorter-tailliability

durations,riskier

cash

flow

s,andgreaterfuture

investment

opportunitieshoardmorecash

forliquidityneeds.On

theother

hand,m

utualinsurers,larger

insurancecompanies,insurers

with

higher

best’sratings,and

highlyleveredinsurerssustain

less

cash

foraccessingmore

easilyalternativefinancial

resources

Byapproachingthemaindif-

ferences

incash

holdings

across

insurancefirm

sinthe

UnitedStates

45Core

etal.(20

06)

Tostudyifgrow

thopportuni-

ties,monitoring,andagency

problemsaredeterm

inantsin

explaining

why

not-for-profit

firm

shave

persistent

cash

holdings

over

time

Excess

endowmentsarenega-

tivelyrelatedtogrow

thopportu-

nitiesandpositivelyrelatedto

CEOcompensation.

However,

firm

sthatholdmorecash

are

morelikelytobe

less

efficient,

which

suggeststhepresence

ofagency

conflicts

Researchingcash

holdings

ontheunexplored

contextof

not-for-profitfirm

sand

reporting

endowmenth

old-

ings

bynot-for-profitfirm

sare,on

average,larger

than

cash

holdings

byfor-profit

firm

s

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

46Custódioand

Metzger

(2014)

Toanalyzetherelationship

betweenCEOs’workexperi-

ence

andcorporatefinancial

policies

Nonfinancialfirm

swith

financial

expertCEOs

onaveragehave

lower

cash

holdings

(by12%

less),ahigher

leverage

ratio

(by6%

more),higherrep-

urchaseshares

(by7%

more)

andlower

investment-to-cash

flow

sensitivity.Furthermore,

financialexpertC

EOshave

bet-

tercommunicationwith

other

organizations

andbetteraccess

toexternalfinancialfunds

Topresentaninteresting

connectionbetweenfirm

swith

financialexpertC

EOs

andcorporatefinancial

policies

Despite

usingexogenousvar-

iables,the

endogenous

matchingbetweenCEOs

and

firm

sbasedon

time-varying

characteristicsinthisarticle

might

have

ledtobiased

results

47Deb

etal.(2017)

Toevaluateifandwhencash

createsshareholdervalue

andenhances

firm

perform

ance

Cash

enhances

firm

perfor-

mance

whenfirm

soperatein

industriesthatarehighlycom-

petitive,research-intensive,or

characterized

byhigh

grow

th.

However,incontextswhere

firm

sarepoorlygoverned,m

ore

diversified

ormoreopaque

tooutsideinvestors,cash

andper-

form

ance

arenegativelyrelated

Tohighlight

therelevanceof

contextualmoderatorssuch

asindustrycompetition,

industryR&

Dintensity,

industrygrow

th,corporate

governance,diversification,

andcorporateopacity

indeterm

iningthecash-

perform

ance

relationship

48Décamps

etal.(2011)

Toproposeadynamicmodel

settlingthelinkage

among

corporatecash

holdings,divi-

dend

paym

ents,new

equity

issuancesandmarket

frictions

Todevelopastylized

continuous-timemodelofafirm

facing

internalagency

costs

andexternalfinancingcosts.To

show

howmarketimperfections

influencecorporatecash

hold-

ings,payoutp

olicies,new

equityissuances,andstock

prices

Toofferanewtheoretical

insighth

ighlightinghowcor-

poratecash

holdingis

affected

bymarketfrictions

andits

repercussionson

risk

managem

entand

dividend

policiesas

wellason

cash

flow

sandstockprice

dynamics

49Denisand

Sibilkov

(2010)

Toexplorewhy

cash

holdings

aremorevaluablefor

Constrained

firm

sholdmore

cash

forprecautionarysavings.

Furthermore,thereis

Topresentthe

reasonsthat

constrained

firm

sgenerally

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

constrained

firm

sthan

unconstrained

peers

hierarchicalcash

holding

behavior

amongconstrained

firm

s.Inthissense,lower

cash

constrained

firm

sfacing

high

costsofexternalfinancinghold

less

cash

than

higher

cash

con-

strained

ones,particularly

becausetheform

erfirm

spro-

duce

lower

cash

flow

than

the

latter

holdmorecash

than

unconstrained

ones

50Denis(2011)

Toprovidean

overview

onstudiesofthedeterm

inants

andconsequences

ofcorpo-

ratecash

holdings,costly

externalfinances,financial

flexibility,and

liquidity

managem

ent

Severalstudies

have

pointed

outfinancialflexibilityas

animportant

component

ofcorpo-

ratefinancialpolicies

Toreview

maintheoriesand

empiricalevidencesthat

firm

smanagefinancialflexi-

bilitythroughthemanage-

mentofcorporateliquidity,

capitalstructure,andpayout

policies

51Disatnik

etal.(2013)

Tomodelandtesttheinter-

actionbetweencorporate

hedgingandliquiditypolicies

Cash

flow

hedgingreducesthe

firm

’sneed

forholdingcash

andallowsittorelymoreon

bank

lines

ofcredit

Tohighlight

theimportance

ofstudying

thefirm

’schoice

ofhedging,cash

holdings,

andlines

ofcreditas

interre-

latedcorporatepolicies

52Dittm

aretal.(2003)

Toexam

inetheinfluenceof

corporategovernance

oncash

holdings

infirm

sthroughout

theworldin1998

Firm

swith

higher

market-to-

book

ratios,higher

R&Dexpen-

ditures,higher

profitability,and

smallersize

save

morecash

than

theircounterparts.Firm

sinside

countries

with

more

developedfinancialm

arkets

andthelowestlevelofshare-

holder

protectionholdmore

cash

than

firm

ssettled

inother

countries

Toem

phasizetheroleofcor-

porategovernance

oncash

reserves

heldby

firm

saround

theworldimputingto

agency

conflictsthecentral

reason

forthesecash

stockpiles

Thevariableofinsider

agency

problemsmeasured

bycountry-levelfam

ilycon-

trolislim

itedby

theavailabil-

ityofdata

(Continues)



NAu

thor(s)

PaperGo

alMainCo

nclusions

MainCo

ntrib

ution

Limita

tions

53Dittm

arand

Mahrt-Sm

ith(2007)

Toproposeanalyzingthe

influenceofcash

holdings

andcorporategovernance

onmarketfi

rmvalue

Topointout

thatpoorly

governed

firm

shoardapproxi-

matelytwiceas

muchofthe

marketvalue

ofexcess

cash

than

firm

sthatarewell

governed,further

suggesting

thattheseextra

cash

reserv

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