Publication Type

PhD Dissertation

Publication Date



This dissertation addresses three topics in corporate cash holdings. The first paper provides a new determinant of cash holdings by examining the impact of earnings transparency on corporate cash holdings. Motivated by Barth et al. (2013), who show that firms with less earnings transparency tend to have higher cost of equity, this paper shows that the cross-section differences in earnings transparency cause variations in firm cash holdings because firms with less earnings transparency have more incentives to hold cash in order to avoid costly external financing. Using data of US firms from 1980 to 2013, it is found that earnings transparency is significantly negatively associated with cash reserves. This impact remains significant when corporate governance measures, accounting-based earnings quality, geography diversity and other information asymmetry measures are accounted for. And this impact is more pronounced in firms with more growth opportunities, more R&D expenses and more financial constraints. It is further found that firm with lower earnings transparency have a higher value of cash holdings, suggesting that cash held by firms with lower earnings transparency are expected to be used to invest, which is also a verification that firms with less earnings transparency hold more cash for precautionary motivation.

The second paper studies on the channel of the relation between corporate cash holdings and stock return. Corporate cash holding is found to be able to predict stock return. Some scholars attribute this to the association of cash with systematic risk with respect to growth options. Others find that the relation is a mispricing effect. I try to test whether the relation between cash and return is driven by systematic risk that captured by cash. The empirical results do not support the risk explanation of cash-return relation. First, the risk loading on CASH factor cannot predict returns, which is not consistent with rational frictionless asset pricing models. Second, CASH factor cannot reflect future GDP growth. Third, CASH and its factor loading exhibit no association with implied cost of capital derived from analysts’ earnings forecasts. Additionally, I find institutional investors tend to buy in more stocks of firms with more cash, and the cash-return relation is less pronounced in firms with more institutional investors, providing evidence supporting the mispricing explanation. Overall, this study casts doubt on the argument that cash can serve as a proxy of systematic risk in the explanation of cross sectional variation in stock returns while finds evidence of the mispricing story.

The third paper studies the monitoring role of sovereign wealth funds on corporate cash holding policy and uses Temasek Holdings as the case. We find that Temasek’s presence has a negative effect on cash for companies with poor governance quality while its cash effect becomes positive for well-governed firms. Temasek’s discerning effect on cash policies highlights the effective monitoring role of sovereign funds.


corporate cash holdings, earnings transparency, information asymmetry, stock anormaly, sovereign wealth funds

Degree Awarded

PhD in Business (Finance)


Corporate Finance | Finance and Financial Management


WANG, Rong


Singapore Management University

City or Country


Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.