Cash Regimes and the Marginal Value of Cash

53 Pages Posted: 14 Apr 2016 Last revised: 7 Feb 2017

See all articles by Joseph Taylor Halford

Joseph Taylor Halford

University of Wisconsin Milwaukee

John J. McConnell

Purdue University

Valeriy Sibilkov

University of Wisconsin - Milwaukee - Department of Finance

Nataliya S. Zaiats

Suffolk University - Sawyer School of Management

Date Written: February 6, 2017

Abstract

Despite theoretical predictions of the importance of cash regimes, most existing studies fail to account for them in estimations of the marginal value of cash (MVC). Many such studies report MVC estimates that conflict with theoretical predictions. We consider the effects of cash regimes on estimates of MVC. We propose ex post regime classification that aligns MVC estimates with theoretical predictions. Our classification renders the effects of financial constraints on MVC insignificant. None of four other MVC determinants established by existing studies are robust to accounting for cash regimes. This paper reaffirms the importance of cash regimes in determining MVC.

Keywords: Cash; cash policies; value of cash; financial constraints

JEL Classification: G32, G34

Suggested Citation

Halford, Joseph Taylor and McConnell, John J. and Sibilkov, Valeriy and Zaiats, Nataliya S., Cash Regimes and the Marginal Value of Cash (February 6, 2017). Available at SSRN: https://ssrn.com/abstract=2761699 or http://dx.doi.org/10.2139/ssrn.2761699

Joseph Taylor Halford

University of Wisconsin Milwaukee ( email )

3203 N Maryland Ave
Sheldon B Lubar School of Business
Milwuakee, WI 53211
United States

John J. McConnell

Purdue University ( email )

MGMT, KRAN
403 West State St.
West Lafayette, IN 47907-2056
United States
765-494-5910 (Phone)
765-494-7863 (Fax)

Valeriy Sibilkov (Contact Author)

University of Wisconsin - Milwaukee - Department of Finance ( email )

Milwaukee, WI 53201-0742
United States

Nataliya S. Zaiats

Suffolk University - Sawyer School of Management ( email )

Boston, MA 02108
United States

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