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Management Views on Corporate Cash Holdings

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Author Info

  • Gary E. Powell

    ()
    (McColl School of Business, Queens University of Charlotte)

  • H. Kent Baker

    ()
    (Kogod School of Business, American University)

Abstract

We survey the CFOs of 1,000 large U.S. companies to learn their views about corporate cash holdings. Specifically, we investigate managerial views about the determinants of cash holdings and whether they believe that corporate governance affects a firm’s level of cash holdings, spending of cash, and value of cash holdings. We find their views provide support for an optimal tradeoff approach to cash holdings, limited support for a financing hierarchy explanation, mixed support for arguments that financial constraints affect a firm’s cash holdings, and generally no support for most agency cost explanations. The survey results show that managers believe the effectiveness of a firm’s corporate governance structures may affect its cash holdings and spending of cash but not the value of its cash holdings.

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Bibliographic Info

Paper provided by McColl School of Business, Queens University of Charlotte in its series Discussion Paper Series with number 2010-01.

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Length: 30 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:msb:wpaper:2010-01

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Web page: http://mccoll.queens.edu/
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Related research

Keywords: Cash Holdings; Corporate Governance;

This paper has been announced in the following NEP Reports:

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  1. Ozgur Arslan & Chrisostomos Florackis & Aydin Ozkan, 2006. "The Role of Cash Holdings in Reducing Investment-Cash Flow Sensitivity: Evidence from a Financial Crisis Period in an Emerging Market," Discussion Papers 06/08, Department of Economics, University of York.
  2. Acharya, Viral V. & Almeida, Heitor & Campello, Murillo, 2007. "Is cash negative debt? A hedging perspective on corporate financial policies," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 515-554, October.
  3. 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.
  4. Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September.
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