Publication Type
Journal Article
Version
acceptedVersion
Publication Date
8-2006
Abstract
We examine the cross-sectional variation in the marginal value of corporate cash holdings that arises from differences in corporate financial policy. We begin by providing semi-quantitative predictions for the value of an extra dollar of cash depending upon the likely use of that dollar, and derive a set of intuitive hypotheses to test empirically. By examining the variation in excess stock returns over the fiscal year, we find that the marginal value of cash declines with larger cash holdings, higher leverage, better access to capital markets, and as firms choose greater cash distribution via dividends rather than repurchases.
Keywords
corporate finance, cash holdings, corporate financial policy
Discipline
Corporate Finance
Research Areas
Finance
Publication
Journal of Finance
Volume
61
Issue
4
First Page
1957
Last Page
1990
ISSN
1540-6261
Identifier
10.1111/j.1540-6261.2006.00894.x
Publisher
Wiley
Citation
FAULKENDER, Michael and WANG, Rong.
Corporate Financial Policy and the Value of Cash. (2006). Journal of Finance. 61, (4), 1957-1990.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1150
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/j.1540-6261.2006.00894.x