Publication Type

Journal Article

Version

Postprint

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

Additional URL

http://dx.doi.org/10.1111/j.1540-6261.2006.00894.x

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