TY  - JOUR
AU  - Bates,Thomas W.
AU  - Kahle,Kathleen M.
AU  - Stulz,Rene M.
TI  - Why Do U.S. Firms Hold So Much More Cash Than They Used To?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12534
PY  - 2006
Y2  - September 2006
UR  - http://www.nber.org/papers/w12534
L1  - http://www.nber.org/papers/w12534.pdf
N1  - Author contact info:
Thomas W. Bates
Eller College of Management
315D McClelland Hall
Tucson , AZ 85721
E-Mail: batest@email.arizona.edu

Kathleen Kahle
McClelland Hall
P.O. Box 210108
Tucson , AZ 85721-0108
E-Mail: kkahle@eller.arizona.edu

Rene M. Stulz
The Ohio State University
Fisher College of Business
806A Fisher Hall
2100 Neil Avenue
Columbus, OH  43210-1144
Tel: 614/292-1970
Fax: 614/292-2359
E-Mail: stulz_1@cob.osu.edu
AB  - The average cash to assets ratio for U.S. industrial firms increases by 129% from 1980 to 2004. Because of this increase in the average cash ratio, American firms at the end of the sample period can pay back their debt obligations with their cash holdings, so that the average firm has no leverage when leverage is measured by net debt. This change in cash ratios and net debt is the result of a secular trend rather than the outcome of the recent buildup in cash holdings of some large firms. It is concentrated among firms that do not pay dividends. The average cash ratio increases over the sample period because the cash flow of American firms has become riskier, these firms hold fewer inventories and accounts receivable, and the typical firm spends more on R&D. The precautionary motive for cash holdings appears to explain the increase in the average cash ratio.
ER  -