Do Corporations Retain Too Much Cash? Evidence from a Natural Experiment

• 成果类型: Article
• 署名作者: Kim, Hwanki Brian; Kim, Woojin; Kronlund, Mathias
• 署名单位: Baylor University; Seoul National University (SNU); Tulane University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhac094
• 发表日期: 2023
• 页码: 2839
• 关键词: US FIRMS HOLD; tax; INVESTMENT; POLICY; experiences; governance; LIFE; FLOW; determinants; finance

摘要

Corporations have accumulated record amounts of cash. We study whether firms' cash retention has been excessive by examining a Korean reform that introduced a new tax on earnings retained as cash. Difference-in-differences tests show that treated firms reduce cash retention and instead increase payouts and investments. Market participants react favorably to the reform, consistent with excessive cash retention. The valuation effects and the alternative uses of the cash are associated with behavioral and agency frictions. Firms that are more subject to behavioral biases increase payouts and experience higher valuations, while poorly governed firms allocate more to investment and experience relatively lower valuations.