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Cash Sources and Financial Constraints: Evidence From Brazilian Listed Firms

Author

Listed:
  • Leonardo Chalhoub

    (Universidade Federal do Rio Grande do Sul)

  • Guilherme Kirch

    (Fundação Getúlio Vargas)

  • Paulo Renato Soares Terra

Abstract

The Finance literature offers evidence that, in Brazil as in the U.S.A., publicly traded firms save more and more cash over the past decades. Using a panel data formed by accounting and market information from listed firms in BM&FBOVESPA from 1995 to 2013 and the model proposed by McLean (2011), estimated by the least squares method, this study aims to gather evidence on the sources of cash retained by companies in the Brazilian market. The results suggest that shares issuance, debt and operating cash flow have positive and significant correlation with the change in cash savings and that operating cash flow is the main source of cash for Brazilian firms. About the role of precautionary motives for the retention decision, evidence was found that in times of growth in these motives, the constrained group retains more from operating cash flow.

Suggested Citation

  • Leonardo Chalhoub & Guilherme Kirch & Paulo Renato Soares Terra, 2015. "Cash Sources and Financial Constraints: Evidence From Brazilian Listed Firms," Brazilian Review of Finance, Brazilian Society of Finance, vol. 13(3), pages 470-503.
    • Handle: RePEc:brf:journl:v:13:y:2015:i:3:p:470-503
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    More about this item

    Keywords

    Cash Policy; Cash Savings; Cash Sources; Panel Data; Least Squares.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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