Diversification and cash dynamics

• 成果类型: Article
• 署名作者: Bakke, Tor-Erik; Gu, Tiantian
• 署名单位: University of Oklahoma System; University of Oklahoma - Norman; Northeastern University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.12.008
• 发表日期: 2017
• 页码: 580-601
• 关键词: Diversification; Organizational structure; Corporate saving; internal capital markets; INVESTMENT

摘要

Why do diversified firms hold significantly less cash than focused firms? We study this question using a dynamic model of corporate investment, saving, and diversification decisions. We find that investment dynamics are more important in explaining the cash differences than financing frictions. More efficient internal capital markets increase cash differences and are especially valuable when a firm diversifies or refocuses. Contrary to static models, more diverse conglomerates have lower cash differences. Endogenous selection (diversifying firms are larger and have better growth opportunities) accounts for 68% of the cash difference, and the diversification event itself reduces cash holdings by 32%. (C) 2017 Elsevier B.V. All rights reserved.