(Non-)Precautionary Cash Hoarding and the Evolution of Growth Firms

45 Pages Posted: 7 Feb 2014 Last revised: 23 Feb 2018

Arnoud W. A. Boot

University of Amsterdam - Amsterdam Business School; Centre for Economic Policy Research (CEPR); Tinbergen Institute

Vladimir N. Vladimirov

University of Amsterdam Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 17, 2017

Abstract

We analyze whether growth firms should delay current investment to hoard cash in order to reduce dilution from external financing. This hoarding motive is the natural counterpart to saving cash as a precaution to help secure funding for future investment opportunities. However, the two motives lead to fundamentally different implications for hoarding and for how cash interacts with key financial and investment decisions. In particular, our paper contributes to understanding why firms choosing private over public financing hoard less, and why product market competition has an ambivalent impact on the public-private choice.

Keywords: cash hoarding; cash holdings; public versus private financing; growth firms; competition; real options

JEL Classification: G31, D92, G32

Suggested Citation

Boot, Arnoud W. A. and Vladimirov, Vladimir N., (Non-)Precautionary Cash Hoarding and the Evolution of Growth Firms (February 17, 2017). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2391227 or http://dx.doi.org/10.2139/ssrn.2391227

Arnoud W. A. Boot (Contact Author)

University of Amsterdam - Amsterdam Business School ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4162 (Phone)
+31 20 525 5318 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Vladimir N. Vladimirov

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

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