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Corporate Cash Holding in Asia

  • Horioka, Charles Yuji

    (University of the Philippines)

  • Terada-Hagiwara, Akiko

    (Asian Development Bank)

In this paper, we analyze the determinants of corporate saving in the form of changes in the stock of cash for 11 Asian economies using firm-level data from the Oriana Database for the 2002–2011 period. We find some evidence that cash flow has a positive impact on the change in the stock of cash, which suggests that Asian firms are borrowing constrained and that they save more when their cash flow increases so that they will be able to finance future investments. Moreover, we find in the developed economy sample that, as expected, cash flow has a positive impact on the change in the stock of cash only in the case of the smallest firms, which are more likely to be borrowing constrained, and find in the developing economy sample that, as expected, the positive impact of cash flow on the change in the stock of cash declines with firm size. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis. Finally, we find some evidence that Tobin’s q has a positive impact on the change in the stock of cash.

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Paper provided by Asian Development Bank in its series ADB Economics Working Paper Series with number 381.

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Length: 27 pages
Date of creation: 22 Oct 2013
Date of revision:
Handle: RePEc:ris:adbewp:0381
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  1. Charles Yuji Horioka & Akiko Terada-Hagiwara, 2011. "The Determinants and Long-term Projections of Saving Rates in Developing Asia," NBER Working Papers 17581, National Bureau of Economic Research, Inc.
  2. Tamim Bayoumi & Hui Tong & Shang-Jin Wei, 2010. "The Chinese Corporate Savings Puzzle: A Firm-level Cross-country Perspective," NBER Working Papers 16432, National Bureau of Economic Research, Inc.
  3. Bacchetta, Philippe & Benhima, Kenza, 2012. "The Demand for Liquid Assets, Corporate Saving, and Global Imbalances," CEPR Discussion Papers 9268, C.E.P.R. Discussion Papers.
  4. Thomas W. Bates & Kathleen M. Kahle & Rene M. Stulz, 2006. "Why Do U.S. Firms Hold So Much More Cash Than They Used To?," NBER Working Papers 12534, National Bureau of Economic Research, Inc.
  5. Enrique G. Mendoza & Vincenzo Quadrini & José-Víctor Ríos-Rull, 2009. "Financial Integration, Financial Development, and Global Imbalances," Journal of Political Economy, University of Chicago Press, vol. 117(3), pages 371-416, 06.
  6. Kiminori Matsuyama, 2007. "Credit Traps and Credit Cycles," American Economic Review, American Economic Association, vol. 97(1), pages 503-516, March.
  7. Viral V. Acharya & Heitor Almeida & Murillo Campello, 2005. "Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies," NBER Working Papers 11391, National Bureau of Economic Research, Inc.
  8. Feldstein, Martin S & Flemming, J S, 1971. "Tax Policy, Corporate Saving and Investment Behaviour in Britain," Review of Economic Studies, Wiley Blackwell, vol. 38(116), pages 415-34, October.
  9. Andrea Gamba & Alexander Triantis, 2008. "The Value of Financial Flexibility," Journal of Finance, American Finance Association, vol. 63(5), pages 2263-2296, October.
  10. Benhima Kenza, 2010. "Financial Development, Technological Change in Emerging Countries and Global Imbalances," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 10.10, Université de Lausanne, Faculté des HEC, DEEP.
  11. Amir Sufi, 2009. "The Real Effects of Debt Certification: Evidence from the Introduction of Bank Loan Ratings," Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1659-1691, April.
  12. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," American Economic Review, American Economic Association, vol. 98(1), pages 358-93, March.
  13. Loukas Karabarbounis & Brent Neiman, 2012. "Declining Labor Shares and the Global Rise of Corporate Saving," NBER Working Papers 18154, National Bureau of Economic Research, Inc.
  14. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
  15. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2004. "The Cash Flow Sensitivity of Cash," Journal of Finance, American Finance Association, vol. 59(4), pages 1777-1804, 08.
  16. Whited, Toni M., 2006. "External finance constraints and the intertemporal pattern of intermittent investment," Journal of Financial Economics, Elsevier, vol. 81(3), pages 467-502, September.
  17. Ju, Jiandong & Wei, Shang-Jin, 2006. "A Solution to Two Paradoxes of International Capital Flows," CEPR Discussion Papers 5981, C.E.P.R. Discussion Papers.
  18. Khurana, Inder K. & Martin, Xiumin & Pereira, Raynolde, 2006. "Financial Development and the Cash Flow Sensitivity of Cash," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(04), pages 787-808, December.
  19. Leigh A. Riddick & Toni M. Whited, 2009. "The Corporate Propensity to Save," Journal of Finance, American Finance Association, vol. 64(4), pages 1729-1766, 08.
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