The Savings of Corporate Giants

Abstract

We construct a novel panel dataset to provide new evidence on how the largest nonfinancial firms manage their financial assets. Our granular data show that, over the past decade, bond portfolios have grown to be at least as large as cash-like instruments, driven by the meteoric rise of corporate bond holdings. To shed light on the drivers of this growth, we conduct a pair of event studies around the 2017 tax reform and the 2020 liquidity crisis. We find that large holdings of marketable securities are primarily driven by cross-border tax incentives, while cash-like instruments are driven by liquidity motives.

Keywords: Superstar firms, corporate cash, corporate bonds, repatriation tax, liquidity management

JEL Classification: G32, G35, G11, E440