Cash Flow Sensitivities and Bank-Finance Shocks in Nonlisted Firms
52 Pages Posted: 9 Jan 2011 Last revised: 5 Apr 2018
There are 2 versions of this paper
Cash Flow Sensitivities and Bank-Finance Shocks in Nonlisted Firms
The Marginal Value of Cash, Cash Flow Sensitivities, and Bank-Finance Shocks in Nonlisted Firms
Date Written: February 8, 2011
Abstract
We study how nonlisted firms trade off financial, real, and distributive uses of cash. We show that firms' marginal value of cash (MVC) affects the mix of external and internal finance used to absorb fluctuations in cash flows; in particular, high-MVC firms employ substantially more external finance on the margin. Linking firms to their main bank, we find that shocks to bank finance affect firms' trade-offs and have real effects in high-MVC firms, making investment more sensitive to firm cash flow. Our analysis suggests that shocks to external financing costs are transmitted to the real economy via firms' marginal value of cash.
Keywords: Cash Holdings, Cash Flow Trade-offs, External Financing Costs, Nonlisted Firms, Bank Lending Channel
JEL Classification: G32, G21
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Determinants and Implications of Corporate Cash Holdings
By Tim C. Opler, Lee Pinkowitz, ...
-
The Cash Flow Sensitivity of Cash
By Heitor Almeida, Murillo Campello, ...
-
Why Do U.S. Firms Hold so Much More Cash than They Used to?
By Thomas W. Bates, Kathleen M. Kahle, ...
-
Why Do U.S. Firms Hold so Much More Cash than They Used to?
By Thomas W. Bates, Kathleen M. Kahle, ...
-
Bank Lines of Credit in Corporate Finance: An Empirical Analysis
By Amir Sufi
-
Corporate Governance and Firm Cash Holdings
By Jarrad Harford, Sattar Mansi, ...
-
Corporate Financial Policy and the Value of Cash
By Michael W. Faulkender and Rong Wang
-
Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies
By Heitor Almeida, Viral V. Acharya, ...