Cash Holdings, Working Capital and Firm Value: Evidence from France

Abstract:     
Although companies deal with day-to-day short term financial decisions, in corporate finance the emphasis is being put on long term financial issues when talking about company’s value. In this paper a sample of French listed companies was chosen to assess the importance of short term financial decisions to company’s value by testing the following hypotheses: an extra euro invested in cash or net working capital is valued less than one euro. Running a panel data analysis, evidences prove that shareholders undervalue cash holdings and net working capital. The results of this paper alert management not to underestimate importance of cash holdings and working capital management; moreover, the results encourage investors to follow company’s actions in this area to maximise their return on investment.

Number of Pages in PDF File: 23

working papers series