Excess Cash and Stock Returns
Abstract"I document a positive relationship between corporate excess cash holdings and future stock returns. The difference in returns of portfolios of high and low excess cash firms amounts to 5% annually or 6% after standard three-factor risk adjustment. Firms with more excess cash have higher market betas and earn lower returns during market downturns. High excess cash companies invest considerably more in the future than do their low cash peers, but do not experience stronger future profitability. On the whole, this evidence is consistent with the notion that excess cash holdings proxy for risky growth options." Copyright (c) 2010 Financial Management Association International..
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Bibliographic InfoArticle provided by Financial Management Association International in its journal Financial Management.
Volume (Year): 39 (2010)
Issue (Month): 3 (09)
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- Palazzo, Berardino, 2012. "Cash holdings, risk, and expected returns," Journal of Financial Economics, Elsevier, vol. 104(1), pages 162-185.
- Berardino Palazzo, 2013. "Net leverage, risk, and credit spreads," 2013 Meeting Papers 436, Society for Economic Dynamics.
- Bessler, Wolfgang & Drobetz, Wolfgang & Haller, Rebekka & Meier, Iwan, 2013. "The international zero-leverage phenomenon," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 196-221.
- David McLean, R., 2011. "Share issuance and cash savings," Journal of Financial Economics, Elsevier, vol. 99(3), pages 693-715, March.
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