Abstract

http://ssrn.com/abstract=1334162
 
 

References (45)



 


 



The Productivity of Corporate Cash Holdings and the Cross-Section of Expected Stock Returns


Satyajit Chandrashekar


affiliation not provided to SSRN

Ramesh K. S. Rao


University of Texas at Austin - Department of Finance

January 26, 2009

McCombs Research Paper Series No. FIN-03-09

Abstract:     
Assuming that firms hold cash to generate rents (NPVs plus growth options), we define the "productivity of cash" as the rents that the firm generates per dollar of cash holdings. We investigate the empirical relationship between the productivity of cash and expected stock returns, and find that the productivity of cash is a highly significant and negative predictor of stock returns. We rationalize this finding as an implication of the inverse relation between the productivity of cash measure and the firm's financial risk. Our evidence suggests that the productivity of cash is a (new) and economically rich factor explaining the cross-section of expected stock returns -- one that subsumes details of the firm's financial risk, discount rates, and the composition of the assets generating cash flows.

Number of Pages in PDF File: 41

Keywords: cash, stock prices, expected returns, productivity

working papers series


Download This Paper

Date posted: January 29, 2009 ; Last revised: March 9, 2009

Suggested Citation

Chandrashekar, Satyajit and Rao, Ramesh K. S., The Productivity of Corporate Cash Holdings and the Cross-Section of Expected Stock Returns (January 26, 2009). McCombs Research Paper Series No. FIN-03-09. Available at SSRN: http://ssrn.com/abstract=1334162 or http://dx.doi.org/10.2139/ssrn.1334162

Contact Information

Satyajit Chandrashekar
affiliation not provided to SSRN ( email )
No Address Available
Ramesh K. S. Rao (Contact Author)
University of Texas at Austin - Department of Finance ( email )
Red McCombs School of Business
Austin, TX 78712
United States
512-475-8756 (Phone)
512-471-5073 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 1,074
Downloads: 285
Download Rank: 60,443
References:  45

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.328 seconds