Cash Holdings: Determinants and Impact on Future Operating Performance for Listed vs. Unlisted Firms
50 Pages Posted: 26 Mar 2012 Last revised: 5 Sep 2014
Date Written: December 6, 2012
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.
Keywords: cash policy, private firms, liquidity, performance
JEL Classification: G32, M40
Suggested Citation: Suggested Citation