Precautionary Saving in a Financially Constrained Firm

• 成果类型: Article
• 署名作者: Abel, Andrew B.; Panageas, Stavros
• 署名单位: University of Pennsylvania; National Bureau of Economic Research; University of California System; University of California Los Angeles
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhad007
• 发表日期: 2023
• 页码: 2878
• 关键词: corporate; uncertainty; consumption; INVESTMENT; demand

摘要

For a firm that cannot raise external funds, cash on hand serves as precautionary saving. We derive a closed-form expression for the target level of cash on hand in the presence of persistent cash flows. Contrary to conventional wisdom, a mean-preserving increase in the volatility of cash flow can decrease this target. Over the set of admissible parameter values, the average impact of volatility on the target is zero. Endogenous selection, reflecting termination of firms that run out of cash, leads to a positive average impact of volatility on the target level of cash, consistent with empirical findings.