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Corporate Cash Holding in Asia

Author Info

Listed author(s):
  • Horioka, Charles Yuji

    (University of the Philippines)

  • Terada-Hagiwara, Akiko

    (Asian Development Bank)

Abstract

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
Handle: RePEc:ris:adbewp:0381
Note: http://www.adb.org/sites/default/files/pub/2013/ewp-381.pdf
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Keywords: corporate saving; corporate investment; borrowing constraints; liquidity constraints; cash flow; cash holdings; cash flow sensitivity of cash; Tobin’s q; firm size; productivity shocks; Asia; Oriana Database; financial sector development; global financial crisis;

Other versions of this item:

Find related papers by JEL classification:
  • D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
  • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
  • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
  • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
  • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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  17. 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.
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Cited by:

  1. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2014. "Mehr Vertrauen in Marktprozesse. Jahresgutachten 2014/15," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201415.

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