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The Rise in Corporate Saving and Cash Holding in Advanced Economies: Aggregate and Firm Level Trends

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  • Mai Chi Dao
  • Chiara Maggi

Abstract

Using cross-country national accounts and firm-level data, we document a broad-based trend in rising gross saving and net lending of non-financial corporates across major industrialized countries over the last two decades, though most pronounced in countries with persistent current account surpluses. We find that this trend holds consistently across major industries, and is concentrated among large firms, driven by rising profitability, lower financing costs, and reduced tax rates. At the same time, higher gross corporate saving have not supported a commensurate increase in fixed capital investment, but instead led to a build-up of liquid financial assets (cash). The determinants of corporate cash holding and saving are also broad-based across countries, with the growth in assets of large firms, R&D intensity, and lower effective tax rates accounting for most of the increase over the last 15 years.

Suggested Citation

  • Mai Chi Dao & Chiara Maggi, 2018. "The Rise in Corporate Saving and Cash Holding in Advanced Economies: Aggregate and Firm Level Trends," IMF Working Papers 2018/262, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2018/262
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    Cited by:

    1. Mr. JaeBin Ahn & Mai Chi Dao & Konrad Adler, 2019. "Innovation and Corporate Cash Holdings in the Era of Globalization," IMF Working Papers 2019/017, International Monetary Fund.
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    3. Markus Demary & Stefan Hasenclever & Michael Hüther, 2021. "Why the COVID-19 Pandemic Could Increase the Corporate Saving Trend in the Long Run," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(1), pages 40-44, January.
    4. Bill Martin, 2020. "Resurrecting the UK Corporate Sector Accounts," Working Papers wp519, Centre for Business Research, University of Cambridge.
    5. Galstyan, Vahagn, 2019. "Understanding the Euro Area Current Account," Economic Letters 7/EL/19, Central Bank of Ireland.
    6. Bill Martin, 2019. "Resurrecting the UK Sector National Accounts after 1945," Working Papers wp514, Centre for Business Research, University of Cambridge.
    7. Michael Buchner, 2020. "Fiscal Policy in an Age of Secular Stagnation," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(3), pages 398-429, September.
    8. Kawamoto,Atsushi & Muraki,Kei, 2020. "Tax Competition : Is It a Source of the Corporate Savings Glut?," Policy Research Working Paper Series 9302, The World Bank.
    9. Galstyan, Vahagn, 2019. "Factor Income and the Euro Area Current Account," Economic Letters 8/EL/19, Central Bank of Ireland.

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