Analysing the effect of excess cash accumulation on financial decisions
AbstractIn this current moment of crisis it is very important for firms to hold a suitable amount of cash. But it is also very important to analyse how this amount of cash affects firm value. Here an in-depth study is made of the determination of firm value centring our attention on the problem of excess cash accumulation. This article adds important value to the existing literature since, employing the panel data methodology in the sample of Spanish nonfinancial firms, it identifies whether excess cash holding affects firm value in general, and investment, financing and dividend decisions in particular. The results show how asymmetric information among the economic agents of the firm affects the cash reserves. In particular, shareholders could penalize the investment made by these firms and consider the positive effect that the debt in particular and the dividend policies exert on the firm. Moreover, the results reveal the importance of financial flexibility as opposed to the arguments provided by agency theory.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 44 (2012)
Issue (Month): 21 (July)
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.