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Is There a U.S. High Cash Holdings Puzzle after the Financial Crisis?


  • Pinkowitz, Lee

    (Georgetown University)

  • Stulz, Rene M.

    (OH State University and ECGI)

  • Williamson, Rohan

    (Georgetown University)


Defining normal cash holdings as the holdings a firm with the same characteristics would have had in the late 1990s, we find that the average abnormal cash holdings of U.S. firms after the financial crisis amount to 10% of cash holdings, which represents an 87% increase in abnormal cash holdings from before the crisis. The increase in abnormal cash holdings of U.S. firms is concentrated among highly profitable firms. Strikingly, abnormal cash holdings do not increase more for U.S. firms than for firms in advanced countries from before the crisis to after the crisis. Though abnormal cash holdings of U.S. multinational firms increase sharply in the early 2000s while cash holdings of purely domestic firms do not, there is no increase in abnormal cash holdings by U.S. multinational firms from before the crisis to after. Further evidence shows that the tax explanation for the cash holdings of U.S. multinational firms cannot explain the large abnormal holdings of these firms. In sum, while the high cash holdings of U.S. firms before the crisis are a U.S.-specific puzzle, the increase in cash holdings of U.S. firms from before the crisis to after is not.

Suggested Citation

  • Pinkowitz, Lee & Stulz, Rene M. & Williamson, Rohan, 2013. "Is There a U.S. High Cash Holdings Puzzle after the Financial Crisis?," Working Paper Series 2013-07, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  • Handle: RePEc:ecl:ohidic:2013-07

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Are firms ever going to empty their war chests?
      by bankunderground in Bank Underground on 2015-07-24 14:30:00


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    Cited by:

    1. Podolski, Edward J. & Truong, Cameron & Veeraraghavan, Madhu, 2016. "Cash holdings and bond returns around takeovers," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 1-11.
    2. repec:eee:reveco:v:49:y:2017:i:c:p:292-312 is not listed on IDEAS
    3. repec:eee:riibaf:v:46:y:2018:i:c:p:181-200 is not listed on IDEAS
    4. Subrahmanyam, Marti G. & Tang, Dragon Yongjun & Wang, Sarah Qian, 2014. "Credit default swaps and corporate cash holdings," CFS Working Paper Series 462, Center for Financial Studies (CFS).
    5. repec:eee:iburev:v:26:y:2017:i:6:p:1100-1113 is not listed on IDEAS
    6. Alves, Paulo, 2018. "Cash holdings around the world: Financial crisis, culture and shareholder rights," MPRA Paper 89861, University Library of Munich, Germany, revised 2018.
    7. repec:pal:assmgt:v:19:y:2018:i:1:d:10.1057_s41260-017-0056-5 is not listed on IDEAS
    8. repec:eee:jbfina:v:82:y:2017:i:c:p:191-202 is not listed on IDEAS

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • 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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