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The impact of competition and time-to-finance on corporate cash holdings

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  • Moritzen, Mark Raun
  • Schandlbauer, Alexander

Abstract

This paper empirically documents how the interaction between competition and time frictions in capital markets impacts firms' cash management decisions. Using the introduction of the U.S. Securities Offering Reform in 2005 as a quasi-natural experiment, we show that a shorter time-to-finance leads to a reduction in corporate cash holdings. This effect is significantly stronger for firms that are exposed to preemption risk. Furthermore, patents mitigate the risk of preemption and the effect of a reduction in time-to-finance on cash holdings is strongest for unconstrained firms.

Suggested Citation

  • Moritzen, Mark Raun & Schandlbauer, Alexander, 2020. "The impact of competition and time-to-finance on corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:corfin:v:65:y:2020:i:c:s0929119919300744
    DOI: 10.1016/j.jcorpfin.2019.101502
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    More about this item

    Keywords

    Cash holdings; Time-to-finance; Competition; Real investment; Capital market frictions;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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