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Costly External Finance and Corporate Investment: The Role of Marketable Securities

Author

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  • Bektemir Ysmailov

    (Nazarbayev University, Graduate School of Business)

Abstract

This paper demonstrates that the precautionary role of cash depends critically on its composition. We show that, following the onset of the global financial crisis, firms with similar total cash reserves experience significantly different investment declines based on the proportion held in marketable securities. Consistent with theory, these results are driven by firms with a greater reliance on external capital. We conduct several tests to address potential endogeneity concerns. We conclude that firms with seemingly adequate precautionary savings in aggregate may still be highly exposed to shocks if their cash holdings are heavily invested in marketable securities.

Suggested Citation

  • Bektemir Ysmailov, 2025. "Costly External Finance and Corporate Investment: The Role of Marketable Securities," Working Papers 2025/04, Nazarbayev University, Graduate School of Business.
    • Handle: RePEc:asx:nugsbw:2025-04
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    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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