Abstract

http://ssrn.com/abstract=1975491
 


 



Why Has the Value of Cash Increased Over Time?


Thomas W. Bates


Arizona State University - Department of Finance

Chinghung (Henry) Chang


Arizona State University - Department of Finance

Jianxin Daniel Chi


University of Nevada, Las Vegas (UNLV) - Department of Finance

December 15, 2011


Abstract:     
The value of cash holdings by U.S. non-financial firms has increased significantly over the past three decades. An additional dollar of cash holdings is valued at $0.61 in the 1980s, $1.04 in the 1990s, and $1.12 in the 2000s. The increase in the value of cash obtains across a variety of firm characteristics, including firm size, the investment opportunity set, financial constraints, and the volatility of cash flow. The general increase in the value of cash can be partially explained by firms that IPO in the 1990s and the 2000s. However, for the 1990s, the increase in the value of cash is predominantly determined by a firm’s investment opportunity set and the volatility of its cash flow. For the 2000s, the increase in the value of cash is largely explained by credit market risk.

Number of Pages in PDF File: 49

Keywords: value, cash holdings, investment opportunities, cash flow volatility, credit market risk

working papers series





Download This Paper

Date posted: December 23, 2011 ; Last revised: July 30, 2012

Suggested Citation

Bates, Thomas W. and Chang, Chinghung (Henry) and Chi, Jianxin Daniel, Why Has the Value of Cash Increased Over Time? (December 15, 2011). Available at SSRN: http://ssrn.com/abstract=1975491 or http://dx.doi.org/10.2139/ssrn.1975491

Contact Information

Thomas W. Bates
Arizona State University - Department of Finance ( email )
W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
Ching-Hung Chang
Arizona State University - Department of Finance ( email )
W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
Jianxin Daniel Chi (Contact Author)
University of Nevada, Las Vegas (UNLV) - Department of Finance ( email )
4505 S. Maryland Parkway
Box 456008
Las Vegas, NV 89154-6008
United States
HOME PAGE: http://sites.google.com/site/jdanielchi/
Feedback to SSRN


Paper statistics
Abstract Views: 1,036
Downloads: 233
Download Rank: 76,187

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.437 seconds