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Asset tangibility, cash holdings, and financial development

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  • Lei, Jin
  • Qiu, Jiaping
  • Wan, Chi

Abstract

Rising intangible assets on corporate balance sheets around the world could limit borrowing capacity and consequently hinder growth if firms must preserve cash and forgo investment opportunities. We show that financial development lowers the sensitivity of cash holdings to tangible assets and promotes firm growth. We also find that sectors with a smaller proportion of tangible assets grow faster in countries with more developed financial markets. Our analysis reveals an important asset tangibility channel through which financial development facilitates firm growth.

Suggested Citation

  • Lei, Jin & Qiu, Jiaping & Wan, Chi, 2018. "Asset tangibility, cash holdings, and financial development," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 223-242.
  • Handle: RePEc:eee:corfin:v:50:y:2018:i:c:p:223-242
    DOI: 10.1016/j.jcorpfin.2018.03.008
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    More about this item

    Keywords

    Asset tangibility; Cash holdings; Investments; Financial development; Economic growth;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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