The Evolution of Corporate Cash
74 Pages Posted: 7 Jul 2016 Last revised: 22 Jun 2018
Date Written: May 25, 2018
We study time-series and cross-firm variation in corporate cash holdings over the past century. The recent increase in cash is not unique in magnitude. However, the recent divergence between average and aggregate cash is new and entirely driven by a shift in cash policies of newly public firms, while within-firm changes are negative or flat since the 1940s. Cross-sectional relations between cash holdings and firm characteristics are stable through the century, though characteristics explain little of the trends in aggregate cash. Macroeconomic conditions, corporate profitability and investment, and (since 2000) repatriation taxes explain aggregate cash over the last century.
Keywords: Cash, Liquidity, IPO, Economic Growth
JEL Classification: G32, E51, H32, N1
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