Cash Holdings: Determinants and Impact on Future Operating Performance for Listed vs. Unlisted Firms

Abstract:     
Research suggests that the cash ratios of private firms are lower than the ones of public firms, which is not consistent with an expectation for increased importance of the precautionary motive for firms with fewer funding options. The study provides a significant explanation on these lower ratios, attributed to differences in leverage, capital expenditures, internally generated cash flows, and corporate governance. The study finally testifies that excess cash holdings are positively associated with future operating performance for private, but not public firms, a finding which is interpreted as a manifestation of capital raising constraints for unlisted vs. listed firms.

Number of Pages in PDF File: 50

Keywords: cash policy, private firms, liquidity, performance

JEL Classification: G32, M40

Accepted Paper Series