Why Do Firms Hold Cash? Evidence from Demographic Demand Shifts

• 成果类型: Article
• 署名作者: Cunha, Igor; Pollet, Joshua
• 署名单位: University of Kentucky; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz124
• 发表日期: 2020
• 页码: 4102
• 关键词: Financial constraints; corporate; INVESTMENT; determinants; PRIVATE; POLICY

摘要

We exploit variation in demand induced by demographics to provide causal evidence of the precautionary motive of cash holdings. We show that firms significantly increase their cash levels in response to exogenous increases in investment opportunities. We also provide novel evidence of the dynamics of accumulation and use of cash. Financially constrained firms build their cash reserves using internal sources. Consequently, they start saving earlier and keep high cash levels longer. Unconstrained firms rely on external financing to both invest and build cash reserves, requiring them to save less and allowing them to incur lower costs of carry.