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On the Determinants of Corporate Cash Holdings in Japan: Evidence from Panel Analysis of Listed Companies [in Japanese]

Listed author(s):
  • Koichi Ando
  • Keiichi Hori
  • Makoto Saito

Exploiting dramatic changes in individual corporate behavior as well as macroeconomic environment for the period between 1982 and 2005, this paper empirically investigates the determinants of corporate cash holdings using the panel data of the companies listed at the three major stock exchanges. We find that like in Pinkowitz and Williamson (2001), the rent extraction by banks over industry firms promoted corporate cash holdings in the early 1980s. However, the weakened bank power was not responsible for a drastic decrease in the cash/asset ratio observed during the first half of the 1990s. Instead, the ratio declined as a consequence of the contraction of investment opportunities, the buildup of business credits as an alternative financial instrument, less needs for dividend payments, and higher costs of cash holdings.

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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-081.

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Date of creation: Aug 2009
Handle: RePEc:hst:ghsdps:gd09-081
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