Has the Value of Cash Increased Over Time?

47 Pages Posted: 2 Aug 2011 Last revised: 15 May 2012

See all articles by Ji-Woong Chung

Ji-Woong Chung

Korea University - Department of Finance

Boochun Jung

University of Hawaii at Manoa - School of Accountancy

Duri Park

Drexel University

Date Written: August 2, 2011

Abstract

We document a dramatic increase in the market valuation of cash holdings by U.S. firms from 1971 to 2010. The value of one dollar increases from $0.35 in the 1970s to $0.97 in the 2000s, indicating that shareholders place much more value on cash in recent years. This increase in cash value is mainly driven by changes in firm characteristics of newly entering firms. However, changes in the characteristics of incumbent firms have also contributed partly to the increase in cash value. Improved monitoring environments, increased investment opportunities, and deleveraging can mostly explain the increase in cash value over time.

Keywords: cash, corporate governance, investment opportunities

JEL Classification: G30

Suggested Citation

Chung, Ji-Woong and Jung, Boochun and Park, Duri, Has the Value of Cash Increased Over Time? (August 2, 2011). Available at SSRN: https://ssrn.com/abstract=1903680 or http://dx.doi.org/10.2139/ssrn.1903680

Ji-Woong Chung (Contact Author)

Korea University - Department of Finance ( email )

Seoul, 136-701
United States

Boochun Jung

University of Hawaii at Manoa - School of Accountancy ( email )

College of Business Administration
Honolulu, HI 96822
United States

Duri Park

Drexel University ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States

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