Cash Holdings and Leverage of German Listed Firms – Evidence from 1992 to 2011

Betriebliche Forschung und Praxis (Forthcoming)

MACIE Paper Series 2015/4

33 Pages Posted: 9 May 2014 Last revised: 21 Jul 2015

See all articles by Marc Steffen Rapp

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Andreas Maximilian Killi

University of Marburg

Date Written: May 1, 2015

Abstract

We examine cash holdings and leverage levels of German listed (non-financial and non-utility) firms. We document a secular increase in cash ratios over the last twenty years (1992–2011), reducing the net debt book leverage ratio for the average sample firm close to zero. Using pre-diction models with standard firm characteristics, our results suggest a fundamental change in firms’ financial policies: In the second half of the sample period, both established firms and IPO firms exhibit substantially higher (lower) cash (net debt leverage) levels than predicted. The unexpected changes among established firms are associated with measures of uncertainty faced by firms. Our results suggest that German firms have increased (reduced) their cash (net debt leverage) levels over time in order to adopt more precautionary financial policies.

Keywords: Germany, cash ratio, leverage ratio, capital structure, multivariate regression analysis

JEL Classification: G31, G32, G34, G39

Suggested Citation

Rapp, Marc Steffen and Killi, Andreas Maximilian, Cash Holdings and Leverage of German Listed Firms – Evidence from 1992 to 2011 (May 1, 2015). MACIE Paper Series 2015/4. Available at SSRN: https://ssrn.com/abstract=2434505 or http://dx.doi.org/10.2139/ssrn.2434505

Marc Steffen Rapp

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Andreas Maximilian Killi (Contact Author)

University of Marburg ( email )

Universitätsstrasse 24
D-35032 Marburg, D-35032
Germany

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