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The Cash Flow Sensitivity of Cash: Replication, Extension, and Robustness

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  • Heitor Almeida
  • Murillo Campello
  • Michael S. Weisbach

Abstract

et alet al.This paper reexamines the empirical evidence on the cash flow sensitivity of cash presented by Almeida . (2004). The original paper introduces a model in which financially constrained firms choose to save cash out of incremental cash flows but financially unconstrained do not. The authors find evidence consistent with this hypothesis on a sample of U.S. public firms between 1971 and 2000. This paper extends that analysis in a number of ways. In particular, it uses a larger sample covering the 1971 to 2019 window, considers a number of alternative definitions of financial constraints, and incorporates new methods and tests suggested by Welch (2020), Almeida (2010), and Grieser and Hadlock (2019). The original empirical findings are robust to these alternative specifications.

Suggested Citation

  • Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2024. "The Cash Flow Sensitivity of Cash: Replication, Extension, and Robustness," Critical Finance Review, now publishers, vol. 13(3-4), pages 351-365, August.
    • Handle: RePEc:now:jnlcfr:104.00000142
    DOI: 10.1561/104.00000142
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    Cited by:

    1. Bui, Dien Giau & Chou, Robin K. & Lin, Chih-Yung & Lu, Chien-Lin, 2025. "CEO neuroticism and corporate cash holdings: Evidence from CEOs’ tweets," Journal of Empirical Finance, Elsevier, vol. 80(C).

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