A transaction cost perspective on why, how, and when cash impacts firm performance
AbstractWhile both financial and behavioral theories suggest that cash holdings may be beneficial to R&D-intensive firms, agency theory would suggest that strong monitoring may be needed to ensure that cash holdings are not squandered. We contend that transaction cost economics provides a valuable lens for understanding the performance implications of cash holdings because not only does it explicate the benefits and costs of cash holdings in a single unified theoretical framework, but it further clarifies how environmental uncertainty critically moderates these relationships. Empirical tests on a large sample of US corporations yield strong support for our theory. Copyright © 2009 John Wiley & Sons, Ltd.
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.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.
Volume (Year): 30 (2009)
Issue (Month): 7 ()
Contact details of provider:
Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kaouthar Lajili & Joseph T. Mahoney, 2006. "Revisiting agency and transaction costs theory predictions on vertical financial ownership and contracting: electronic integration as an organizational form choice," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(7), pages 573-586.
- Williamson, Oliver E, 1991. "Economic Institutions: Spontaneous and Intentional Governance," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 159-87, Special I.
- Gilson, Stuart C., 1989. "Management turnover and financial distress," Journal of Financial Economics, Elsevier, vol. 25(2), pages 241-262, December.
- Rachelle C. Sampson, 2004. "Organizational choice in R&D alliances: Knowledge-based and transaction cost perspectives," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(6-7), pages 421-436.
- Dittmar, Amy & Mahrt-Smith, Jan & Servaes, Henri, 2003. "International Corporate Governance and Corporate Cash Holdings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 111-133, March.
- Oliver E. Williamson, 2005. "The Economics of Governance," American Economic Review, American Economic Association, vol. 95(2), pages 1-18, May.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Ron Sanchez, 2003. "Integrating transaction costs theory and real options theory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 267-282.
- Alan Carruth & Andy Dickerson & Andrew Henley, 1998.
"What Do We Know About Investment Under Uncertainty?,"
Studies in Economics
9804, Department of Economics, University of Kent.
- Carruth, Alan & Dickerson, Andrew & Henley, Andrew, 2000. " What Do We Know about Investment under Uncertainty?," Journal of Economic Surveys, Wiley Blackwell, vol. 14(2), pages 119-53, April.
- Daniel F. Spulber, 2003. "The intermediation theory of the firm: integrating economic and management approaches to strategy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 253-266.
- Deephouse, David L. & Wiseman, Robert M., 2000. "Comparing alternative explanations for accounting risk-return relations," Journal of Economic Behavior & Organization, Elsevier, vol. 42(4), pages 463-482, August.
- Tim Opler & Lee Pinkowitz & Rene Stulz & Rohan Williamson, 1997.
"The Determinants and Implications of Corporate Cash Holdings,"
NBER Working Papers
6234, National Bureau of Economic Research, Inc.
- Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999. "The determinants and implications of corporate cash holdings," Journal of Financial Economics, Elsevier, vol. 52(1), pages 3-46, April.
- Giovanni S.F. Bruno, 2004.
"Approximating the Bias of the LSDV Estimator for Dynamic Unbalanced Panel Data Models,"
KITeS Working Papers
159, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.
- Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June.
- Williamson, Oliver E, 1998. "The Institutions of Governance," American Economic Review, American Economic Association, vol. 88(2), pages 75-79, May.
- Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
- Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
- Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.