Can Changes in the Cost of Cash Resolve the Corporate Cash Puzzle?
发布时间:2014-04-04
Topic:
Can Changes in the Cost of Cash Resolve the Corporate Cash Puzzle?
Time:
星期四,2014-04-04 10:30-12:00
Venue:
Room 505, Datong Building West Huaihai Road 211, SAIF
Speaker:
Martin Schmalz

To answer this question, we first create a measure of the opportunity costs of holding liquid assets as the wedge between the cost of capital and the return of firms' cash portfolio. Exploiting both cross-sectional and time-series variation of opportunity costs 1980-2011, we estimate a negative effect of opportunity costs on the cash-to-assets ratio of U.S. nonfinancial Compustat firms. We then use the estimate to predict changes in aggregate cash holdings for 1945-2013 and find that they closely match actual changes in cash holdings over that period. Differences in opportunity costs also explain cross-country differences and within-country time variation of cash-to-assets ratios in the five largest European economies and Japan. Our results make evident that current U.S. corporate cash holdings are not abnormal, neither in a historical nor in an international comparison.